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Wisconsin goes mega with Q4 commitments

  • Ares, Warburg among mega funds backed by Wisconsin
  • Pension previously bullish on small, mid-market buyouts
  • Also co-invests $10 mln in IT deal

In a reversal of course, the State of Wisconsin Investment Board (SWIB) committed more than $380 million to mega funds in the fourth quarter.

The $99.1 billion retirement system has been bullish on small and middle- market private equity funds since at least late 2014, according to pension documents. Over the last four years, Wisconsin also unloaded stakes in large buyout funds managed by BC PartnersThe Blackstone GroupKohlberg Kravis Roberts and The Carlyle Group as it shifted focus down market.

Wiscon allocated $597 million across eight private equity funds and a co-investment, according to an investment report included in its February 10 meeting materials. The total included a $100 million commitment to a $6.5 billion flagship offering from Ares Management and $87 million to Warburg Pincus’ $12 billion fund, according to pension documents.

Wisconsin committed $50 million to Coller International Partners VII, a $7.15 billion vehicle, and another $50 million to Berkshire Partners, which is seeking $5.5 billion for its ninth flagship fund.

Finally, the pension committed $100 million to TSSP Adjacent Opportunities Partners, a TPG fund that will invest in “mid-return” deals that don’t fit any of TPG’s existing platforms, according to a 2014 Oregon Investment Council memo.

Wisconsin’s fourth quarter commitments included some mid-market funds as well. It backed a pair of TSG Consumer Partners funds for a combined $150 million. TSG7 A will invest between $50 million and $400 million in consumer companies, while TSG7 B will invest between $15 million and $50 million in smaller businesses. TSG raised $2.5 billion across the two funds.

In addition to its fund commitments, the retirement system continued to expand its co-investment portfolio, allocating $10 million to an undisclosed information technology deal in the fourth quarter.

Spokeswoman Vicki Hearing did not respond to a request for comment.

Wisconsin held an 8.1 percent allocation to private equity as of December 31. Its target range is 4 percent to 10 percent. The system’s $6.9 billion private equity portfolio delivered an 11.5 percent 10-year return through the end of 2015, surpassing its benchmark by roughly 2 percentage points.

Action Item: For Wisconsin’s most recent investment reports, visit http://bit.ly/1O5B0MY