The Washington State Investment Board has edged above its target allocation, thanks to private equity accounting for 25.3 percent of its $56.3 billion portfolio as of the end of September. Its target allocation is 25 percent.
What that means for one of the industry’s biggest limited partners—the board committed more than $3 billion to private-equity funds in both 2007 and 2008—isn’t yet apparent. But we know that its pockets still weren’t empty as of the board’s November 18 meeting.
According to spokeswoman Liz Mendizabal, the board approved an investment of up to $200 million to Vestar Capital Partners VI LP, a buyout fund with a target of $3.5 billion. Washington also committed $175 million to the three predecessor funds managed by New York-based Vestar Capital Partners—$20 million to the third fund in 1997 (producing a 1.27x investment multiple for the state as of March 30), $55 million to the fourth fund in 1999 (1.62X), and $100 million to the fifth fund in 2005 (1.22x).
At the same meeting the board approved an investment of up to $200 million to KSL Capital Partners III LP, earmarked for acquisitions of companies in the travel and leisure industry. Denver-based KSL Capital Partners has more than $1. 6 billion under management, according to its Web site. Washington has provided nearly 10 percent of that amount—$100 million committed in 2006 (producing a 1.14x investment multiple for the state as of March 30), and $50 million in 2009 (1.23x).
Apart from its private equity program, Washington has several other programs that qualify as alternative investments. Building on its real estate portfolio, the board last month approved an investment of up to $500 million to Evergreen Real Estate Partners, bringing total commitments to this fund by the state since 2004 to $2.5 billion, according to Mendizabal.
The board also approved, as part of its Innovation Portfolio, an investment up up to $300 million in the Lone Star Fund VII (U.S.) LP, earmarked for investments in distressed debt and equity assets. (The Innovation Portfolio, which can grow to 5 percent of the fund, was carved out in 2005 to let the state invest outside of traditional asset classes.) And the board approved an investment of up to $125 million in Sheridan Production Partners II LP, earmarked for oil an gas investments. That fund will join what the state calls its Tangible Assets program, which includes timber and farmland.