Firms & Funds

Washington ends year with $1.5 bln PE blitz

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Washington State Investment Board, private equity, pension fund, Wellspring Capital Management, New Mountain Partners
The Space Needle is seen as snow flurry clouds surround downtown Seattle January 17, 2012. Residents of the Puget Sound region are bracing themselves for a major snowstorm overnight that is expected to deliver the highest snowfall in 25 years. Photo courtesy of REUTERS/Anthony Bolante - RTR2WFPP
  • Washington committed more than $1.5 bln to PE at December meeting
  • Backs KKR, Advent, PAG Asia
  • Washington PE portfolio valued at $17.8 bln

The Washington State Investment Boardclosed out 2015 with three new commitments to private equity totaling more than $1.5 billion, spokesman Chris Phillips told Buyouts in an email.

The $103.4 billion retirement system’s investment board approved a commitment of up to $750 million to Kohlberg Kravis Roberts & Co’s 12th flagship fund at its December 17-18 meeting, Phillips said. The commitment equals the amount Washington allocated to KKR North America Fund XI, which it deployed across two separate commitments.

Washington secured its first $500 million commitment to KKR North America Fund XI in November 2012, netting the pension a 24.22 percent internal rate of return as of June 30, according to pension documents. A second $250 million commitment made the following year netted a 20.74 percent IRR.

KKR set a $10 billion target for North America Fund XII. It is offering a six month waiver to LPs who commit to the fund’s first close, with additional incentives for larger commitments, according to documents from the Oregon Investment Council, which committed up to $500 million to the fund in December.

Like Oregon, Washington is a long time KKR LP. The pension has committed at least $8.6 billion to the firm since its inception.

In addition to its commitment to KKR, Washington allocated up to $600 million to Advent International GPE VIII, which is targeting $12 billion for investments in large buyouts in North America and Europe. Advent International’s newest flagship fund is attracting strong demand from investors, so much so the firm was able to drop a preferred return it offered in prior flagship funds. (GPs who offer funds with preferred returns must clear their hurdle before they collect carried interest.)

Advent International GPE VII netted a 15 percent IRR as of June 30, according to the California Public Employees’ Retirement System.

Washington also committed up to $200 million to PAG Asia II, which is targeting $3 billion with a $3.5 billion hard cap for investments in Asian businesses. This would be Washington’s first fund investment with PAG, whose previous fund netted a 16.8 percent IRR and 1.3x multiple as of June 30, according to CalPERS.

Washington valued its private equity portfolio at $17.8 billion as of September 30, according to a recent investment report. The portfolio has delivered an 11.44 percent 10-year annualized return net of fees.

Outside of private equity, Washington committed $400 million to Stonepeak Infrastructure Fund II. The retirement system also allocated up to $100 million to a “yet-to-be named or structured” side-car vehicle to invest alongside Stonepeak II, Phillips said. Washington committed $250 million to Stonepeak Infrastructure Partners’ previous fund.

Action Item: Learn more about Washington’s investments here: www.sib.wa.gov.