29september 2013 private equity international

The biggest fund investors

in private equity

private equity international september 201330

Cheque matesThe LP50 is a unique new ranking developed by PEI to identify the biggest and most active investors in private equity funds today

tHe lp50

Who are the most significant limited part-ners in the current private equity market?

Any attempt to answer this question might consider various factors: total assets under management, allocations; team size; geographical reach; thought leadership; co-investment ability; speed of movement; and so on.

But the more we thought about it, the more it seemed to us that by far the most important metric (particularly in the cur-rent fundraising climate) was this: how actively is that LP committing capital to private equity firms at the moment?

This thought led us to develop the LP50 – a unique new ranking of the biggest and most active investors in the business, as measured by the amount of capital they committed to third-party-managed funds in the preceding one-year period.

1Canada pension plan inVestment board

$3.99bn

Canadian pensions have been aggressively changing tack over the years to do more direct private equity deals, but primary fund commit-ments – and corner-stone investments, no less – are by no means off the table for CPPIB. The institution was the most active fund investor during the period by a huge margin, committing nearly $4 billion to private equity funds. This included ear-marking $654 million for Behrman Capital’s $1 billion fund as well as an eye-popping €650 million commitment to CVC Capital Partners’ €10.5 billion European fund.

With a minimum commitment size of $75 million, CPPIB’s Toronto- and London-based fund investment team, led by CEO Mark Wiseman, maintains relationships with more than 80 GPs.

It doesn’t just parachute in to evaluate emerging markets, either. It’s had a dedi-cated Asia-Pacific investment team since 2008, having been one of the first large Western LPs to open a Hong Kong office. Focused on pan-Asian funds, as well as country managers in China, Japan, Korea, India and Australia, CPPIB’s recent commit-ments in the region included RMB 1,800 million ($295 million; €222 million)to FountainVest’s second ‘China Growth Fund’ and $300 million to MBK Partners’ third Korea-, China- and Japan-focused vehicle.

There’s no denying CPPIB’s direct and co-investments activity continues to grow, but a meaningful chunk of the $180.2 bil-lion institution’s 17.8 percent private equity allocation is still being put to work via tra-ditional primary fund commitments.

Wiseman: on top

Our Research & Analytics team, which tracks the activity of fund investors and managers globally, compiled the ranking. We began by asking investors around the globe for the total value of their fund com-mitments between 1 March 2012 and 28 February 2013; we then ‘trusted but veri-fied’ the numbers submitted. For those LPs who release this information publicly, we calculated the total ourselves and sought to verify these numbers with the LP directly.

We’ve also focused purely on active private equity fund investors, so we’ve tried to exclude all direct, co-investment, separate account and secondaries activity in our final numbers. Other strategies such as infrastructure and real estate were also off-limits, for obvious reasons.

If we couldn’t confirm the specific fund investment number (as distinct from the overall private equity investment figure) we excluded that institution from the final ranking. So it’s possible that the LP50 may exclude some investors who would have made the list given perfect information. (We take a look at who some of these might be on p. 34.)

$75.2bn*Total capital committed to private equity by the LP50 during the qualifying period

$5.7trnTotal AUM of the LP50

* Since we’ve included the biggest fund of funds managers in the main ranking, we recognise this raises the possibility of double-counting in the cumulative total. However, we took the view that there would be relatively little overlap, if any.

september 2013 private equity international 31

Dutch group APG manages €329 billion in assets for seven Dutch pension funds in the region. Its private equity arm committed slightly less than $4 billion to funds during our qualifying period – much of which was invested via AlpInvest Partners, the fund of funds it sold its stake in two years ago.

“In the past, APG outsourced its whole private equity programme to AlpInvest. In the future, APG will address some segments of the private equity market using its inter-nal management team, but will continue to partner with AlpInvest for other parts of the programme,” a spokesperson previ-ously told PEI.

As part of this effort, it has recruited several former AlpInvest executives – including Iain Leigh, who joined as APG’s head of global private equity in New York, and Megan Bethke, who was hired as a senior portfolio manager in June.

3CaliFornia publiC employees’ retirement

system $3.3bn

Yes, it’s scaling back relationships and making greater use of separate accounts, but the $254.9 billion public pension system remains one of the largest backers of private equity funds around.

Its 12.4 percent private equity alloca-tion allowed it to commit $3.3 billion to

2apG asset manaGement $3.91bn

Cinven Fund, KKR’s second Asian fund and Actis Global 4 were also some of the GPs to receive WSIB commitments.

The CIO has also revealed that WSIB, like many big LPs, is currently exploring a few separate account arrangements with some of its 37 core GP relationships.

5pennsylVania publiC sCHool employees’

retirement system $3.17bn

It’s all change at the moment at Pennsyl-vania PSERS, which this year began its search for a chief investment officer fol-lowing the retirement of Alan Van Noord. At the same time, the system has also started the process of trying to reduce its private equity exposure substantially – from a 30 percent allocation to 16 percent over the next decade. And recent performance has not been good: its private equity portfolio returned 2.3 percent during the first quar-ter of this year, even as its global equities portfolio returned 7.4 percent.

Nonetheless, none of this has stopped the system from committing; indeed, it continues to be one of the most prolific fund investors in private equity. During our qualifying period, it committed more than $3 billion to funds including Catterton and Coller Capital. It also re-upped $100 mil-lion each with Bain Capital Fund XI and New Mountain Partners IV and added three new relationships to its portfolio: Morgan Stanley, Triton Partners and HgCapital.

a dozen or so private equity funds during the period, including $50 million to Clear-lake Capital Partners III, a hybrid debt/special situations ‘graduate’ from its emerg-ing managers programme; $400 million to Riverstone’s fifth global energy fund; $400 million to Cerberus Capital Management’s latest vehicle; and $500 million to KKR’s second Asian fund.

In recent years, CalPERS has become stricter about the terms it is willing to accept from GPs. But the system remains enormously influential – particularly in the emerging manager community, which has accounted for about 18 percent of all CalP-ERS’ private equity investments since 2009.

4WasHinGton state inVestment board

$3.23bn

WSIB has long been one of the asset class’ biggest supporters. With a 17.5 percent private equity allocation, the $92 billion system represents 17 different public pen-sions for the State of Washington.

Having launched its private equity pro-gramme in 1981, chief investment officer Gary Bruebaker stresses the strength of its relationships with top managers. Roughly 60 percent of its private equity portfolio is devoted to large-cap buyout/mega-funds, so it’s perhaps not surprising that among its commitments during the period were $400 million each to Silver Lake’s and First Reserve’s latest global funds. The Fifth

private equity international september 201332

6Teachers reTiremenT sysTem of Texas $3.14bn

Texas Teachers is a key relationship for many GPs, with a steady com-mitment pace that’s expected to equate to $3 billion deployed during 2013 alone. During the first quarter, it pledged $460 million to four

funds, including $150 million to Insight Ven-ture Partners VIII and €112 million ($149.4 million) to Triton’s fourth vehicle.

Rich Hall took the alternative pro-gramme’s reins roughly a year ago when prior head Steve LeBlanc joined the private sector. Hall’s resolutely bullish on the asset class. “We know that over the last 12 years our private equity portfolio has generated returns that are more than $3 billion higher than if we had invested that money in the public stock market,” he told PEI previously.

Like his predecessor, Hall is big on “the Texas way” of investing. At its heart is a “premier list” of private fund managers that TRS has pre-scrutinised and pre-certified as being top-quartile – and to whom the bulk of TRS’ private markets capital will be allocated.

7hamilTon lane$2.3bn

Hamilton Lane is headquartered in Phila-delphia and started by building relationships with many of what have become the who’s-who of US-based private equity investors: the various state pension plans who were early embracers of the asset class (after setting up in 1991, its first client was CalPERS). But the firm has grown to match the global appetite of these clients and by a wide margin was the most active fund of funds manager on this list in terms of total commitments.

Hall: bullish

committed $1 billion; it’s currently on track to do at least $2 billion in 2013).

The system committed $2.07 billion to private equity during the qualifying period to funds including Advent International GPE VII, as well as Silver Lake IV ($100 million) and TowerBrook Investors IV ($190 million).

Florida, too, has suffered from staff turn-over in its alternatives programme. After 11-year veteran Jim Treanor left to join the private sector several years ago, it launched a review of its investment staff’s compensation structure, which may include performance-based incentive pay in an effort to retain talent.

10safe invesTmenT company $2bn

China’s State Administration of Foreign Exchange operates as a private sovereign wealth fund via its Hong Kong branch. It’s the third largest of the SWFs included on this list, with assets under management of about $568 billion. About 5 percent of the country’s $3.3 trillion in foreign-exchange reserves is allocated to private equity.

SAFE, which was founded in 1997, also has a New York office that focuses on pri-vate equity and real estate assets – which are intended to help SAFE minimise its exposure to US government debt. Three other sovereign wealth funds operate under China’s SAFE, but they aren’t as large as the SAFE Investment Company, according to the Sovereign Wealth Fund Institute.

SAFE committed $2 billion to private equity funds during our qualifying period.

One hundred percent of its discretionary net asset value of $12.4 billion is allocated to private equity – and it committed $2.3 billion in the period for this year’s LP50.

8new york ciTy employee reTiremenT sysTem

$2.1bn

NYCERS manages $129.4 billion for five separate city-wide pension funds, includ-ing New York City Fire Department Pension Fund and New York City Teachers’ Retire-ment System.

During our qualifying period it commit-ted more than $2 billion to private equity funds, including large-cap groups like Silver Lake and Nautic Partners.

The bad news for NYCERS this year was the loss of its private equity head, Barry Miller, who left to join Landmark Partners after just two years with the system (Landmark has just launched a $25 million co-investment fund with the pension system). The search is on for Miller’s replacement, but don’t hold your breath. Before Miller joined in 2011, Larry Schloss, the chief executive officer in the Comptroller’s office, had been overseeing the portfolio for a year – and before that, the position had been vacant for six years.

9florida sTaTe board of adminisTraTion $2.07bn

The Tallahassee-based system Florida SBA has $133.9 billion in assets under manage-ment, and an allocation to private equity of just under 5 percent.

Its LP50 total is broadly in line with its previously stated aim of committing $6 billion to alternative investments over the course of the next three years (in 2012 it

Tallahassee: managing $133.9bn

Schloss: overseer

september 2013 private equity international 33

11 California State teaCherS’

retirement SyStem $1.95bn

The largest public teachers’ pension fund in the US allo-cates 12.8 percent to private equity. During the period, CalSTRS committed $1.95 bil-lion to private equity, including $250 million

to its emerging managers programme.In its last fiscal year, CalSTRS’ private

equity returns hit 13.9 percent, even edging out near-neighbour CalPERS. And while it may have underperformed its short-term benchmark slightly, chief investment officer Chris Ailman told PEI recently that he’s “totally bullish” on private equity.

12national PenSion ServiCe

of Korea $1.78bn

The $320 billion NPS has been investing in alternatives since 2002 and expects to have a 16 percent allocation to private equity, infrastructure and real estate by 2016. During the LP50 period, it committed $1.78 billion to funds including SK Incheon Refinery Investment Fund, a local energy vehicle, and Posco Woori EIG Global, a local natural resources and steel fund.

13PubliC SeCtor PenSion

inveStment board $1.77bn

One of Canada’s largest investment manag-ers, PSP Investments has an allocation of about 9 percent to private equity. It com-mitted $1.77 billion during the period.

14 univerSitieS

SuPerannuation

SCheme $1.7bn

The second largest pension fund in the UK plans to increase its co-investment activity, but it still committed $1.7 billion to pri-vate equity funds during the period. CVC,

Oaktree, Silver Lake, Advent and Citic are among the GPs it lists on its website as ‘sample’ relationships it maintains.

15PGGm $1.57bn

Dutch investment manager PGGM manages roughly €128 billion for five pension fund clients, with a 6 percent private equity target.

16univerSity of texaS

inveStment manaGement

ComPany $1.56bn

More than a quarter of UTIMCO’s $21.4 billion in AUM is invested in private equity. During the period, it committed to Victoria South America Partners, a fund managed by Buenos Aires-based Victoria Capital Part-ners, and Ford Financial, a Dallas-based financial services specialist.

17auStralia future fund

$1.51bn

The seven-year old sovereign wealth fund, which has $87.2 billion in assets under management, invests in a select number of managers including FountainVest, Oaktree, Horsley Bridge, Adams Street, Hellman & Friedman, Nordic and Advent.

18State of WiSConSin

inveStment board $1.5bn

Voted LP of the Year for North America in last year’s PEI Awards, Wisconsin has been a prominent critic of some of the industry’s largest firms, declaring a preference for the mid-market and putting its mega-fund interests on the auction block. Mid-market special situations firm Clearlake Capital was among those to receive fresh commitments during the LP50 period.

19Government emPloyeeS

PenSion fund $1.45bn

South Africa’s largest pension system has a relatively small allocation to private equity – 1.15 percent of its assets – but it still managed to put almost $1.5 billion to work during the period.

20neW yorK State Common

fund $1.41bn

This $160.4 billion New York fund con-tinued to be a big fund investor during our qualifying period – but for how much longer? It’s currently in the middle of a reorganisation that it hopes will allow it to invest in fewer primary funds, instead putting its money to work via funds of funds or separate accounts.

21minneSota State board

of inveStment $1.35bn

The $65 billion system’s investments during the period included a $200 million re-up to Advent International GPE VII and a $100 million commitment to Silver Lake Partners IV.

22adamS Street PartnerS

$1.36bn

The Chicago-based fund of funds manager committed to managers including North American-focused TriVest Fund V, Water Street Healthcare Partners III and Mainsail Partners III during the period.

the toP 10 fundS of fundS

InstItutIon totAL CoMMIttED

1 Hamilton Lane $2.30bn

2 Adams Street Partners $1.36bn

3 Neuberger Berman $1.10bn

4 Pantheon $920m

5 Abbott Capital Management $780m

6 SL Capital Partners $410m

7 Commonfund Capital $343m

8 Portfolio Advisors $342m

9 Danske Private Equity $310m

10 Access Capital Partners $305m

Ailman: still positive

private equity international september 201334

23european inVestment

Fund $1.35bn

With the backing of the European Invest-ment Bank, the European Commission, EU Member States and other third par-ties, EIF made $1.35 billion in commit-ments to firms including Warsaw-based Enterprise Investors and the UK’s North-Edge Capital.

24neW yorK state teaCHers’

retirement system $1.3bn

The $88 billion pension counts more than 77 GPs in its portfolio. In the first quarter of 2013 it committed $15 million to Spark Capital, $150 million to Pine Brook and $85 million to KKR Asia Fund II.

25oreGon publiC employees’

retirement system $1.28bn

The $62.3 billion pension fund plans to up its PE allocation from 16 to 20 percent over the next three to five years – which could see it place higher in our next ranking if all that capital goes toward fund commitments.

26la Caisse de dépôt et

plaCement du QuébeC

$1.25bn

The Canadian system plans to increase its allocation – though this could mean more separate accounts, CEO Roland Lescure has said. As of 31 December, about 55 percent of La Caisse’s private equity portfolio was direct investments and the balance in funds.

27massaCHusetts pension

reserVes inVestment

manaGement board

$1.2bn

MassPRIM is honing a strategy that will allow it to commit up to $1 billion to pri-vate equity per year. Commitments during the LP50 period included $100 million to TowerBrook and $150 million to Wayzata Investment Partners.

28miCHiGan department oF

treasury $1.2bn

The Lansing-based system committed $1.2 billion to private equity funds during the period – including Apax VIII and Nordic VIII.

29uniVersity oF CaliFornia

reGents endoWment

Fund $1.16bn

With $80.1 billion in assets under man-

agement, the Uni-versity of Califor-nia system’s endow-

ment is the largest of its kind on this list

and committed over $1 billion during the period to strategies including distressed debt and energy.

30britisH Columbia

inVestment manaGement

Corporation $1.15bn

The Canadian organisation’s allocation to private equity currently stands at about 4.6 percent and its commitments topped $1.15 billion during the period.

31neW Jersey diVision oF

inVestment $1.12bn

It’s been making noise about doing more directs to reduce fees, but New Jersey’s still busy making commitments. Managers it backed included Silver Lake and Anacap.

notable by tHeir absenCe

Sovereign wealth funds are an increasingly important source of capital for private equity, although they are often reluctant to supply specific information about their investments.

The Abu Dhabi Investment Authority, a United Arab Emirates sovereign wealth fund, commits between $3 billion and $5 billion annually to private equity – although it’s apparently now trying to reduce its externally-managed assets. Then there’s the Kuwait Investment Authority, which puts about $1 billion to work each year. It doesn’t normally bother signing cheques any smaller than $200 million.

Asian sovereign funds are also very active, in the region and beyond. The Gov-ernment of Singapore Investment Corporation, which manages the repub-lic’s foreign reserves, is set to open an office in Brazil next year, to manage its Latin American fund investments, while compatriot Temasek Holdings (which has a 27 percent alternatives allocation) also plans to increase its exposure in LatAm. In China, the behemoth is the China Investment Corporation, whose AUM was $575 bil-lion in 2012, although the Hong Kong Monetary Authority is also ramping up its allocation to private equity, with a focus on Asia-Pacific funds. Finally the Korea Investment Corporation has about $56.6 billion in assets, although it’s increasingly focused on direct and co-investment opportunities.

Away from the sovereigns, one notable absentee is the Ontario Teachers’ Pension Fund, which pledged $3.8 billion to the asset class during the period across all its primary, secondary, direct and co-investment activity. And then there’s The Harvard Management Company, which recently saw the departure of well-regarded invest-ment chief Peter Dolan. The endowment has generally been pretty cautious about the asset class, but it did up its allocation by 3 percent this year. On the fund of funds side, both AlpInvest and BlackRock declined to participate.

Here are some big LPs that may have made the list, but declined to provide or confirm figures about their fund investment activity

september 2013 private equity international 35

32Metropolitan life

insurance coMpany $1.1bn

The highest-ranked insurance company on the LP50, MetLife has $415.4 billion in assets under management and commit-ted about $1.1 billion during the period.

32 neuberger berMan

$1.1bn

Funds of funds manager Neuberger Berman committed $1.1 billion to funds during the period, including Vista Equity Partners.

34texas county and district

retireMent systeM $1.04bn

The system com-mitted more than $1 billion to GPs including Water Street, Resource Capital and Spark Capital, and plans

to keep it coming: it raised its target alloca-tion to 10 percent from 6.8 percent.

35teachers’ retireMent

systeM of illinois $1.04bn

Illinois Teachers committed $1.04 billion to funds including Clearlake Capital Partners III and NGP Natural Resources X.

36pantheon

$920M

The UK fund of funds manager, led by man-aging partner Paul Ward, invested $920 mil-lion in funds like HgCapital Mercury and Deutsche Beteiligungs’ sixth vehicle.

37los angeles county

eMployees retireMent

association $900M

LACERA boosted its private equity invest-ments by 140 percent from last year and plans to commit $1.8 billion in 2013. Mangers it backed during the LP50 period included Riverside and Noridc.

38allianz group

$820M

The big German insurer currently has a 1 percent allocation to private equity fund Investments, and insists that its appetite for the asset class remains unchanged, despite Solvency II.

39 abbott capital

ManageMent $780M

The fund of funds committed $780 mil-lion mainly to North American funds during the period. GPs backed by Abbott in recent years include Riverside, GTCR Golder Rauner, Canaan Partners and First Reserve.

40ilMarinen Mutual pension

insurance coMpany $750M

Helsinki-based Ilmarinen looks after about one-third of the employment pension market in Finland. It began investing in private equity in 1994 and since then it has committed to Silver Lake and Nordic, among others.

41cnp assurances

$730M

BC Partners’, Equistone’s and Demeter’s new funds are among the latest additions to the portfolio of CNP, a French insurer.

42skandia life

$720M

This Nordic LP’s relationships include EQT, Arsenal and Sofinnova Capital.

43Virginia retireMent

systeM $670M

About 8.3 percent of the pension’s AUM is dedicated to private equity. It made com-mitments to GPs including Nordic.

44new Mexico state

inVestMent council $650M

The $16.27 billion system backed funds including EnCap, Towerbrook, Asia Alter-natives and Coller International.

45alaska perManent fund

$640M

The oil- and gas-focused sovereign wealth fund allocates 4.4 percent of its $43.9 billion AUM to private equity. It’s currently making moves to form strategic relationships with major GPs, like The Carlyle Group, in the hope of tapping into their access to dealflow in the natural resources and energy space.

46state teachers

retireMent systeM of

ohio $620M

This year, Ohio Teachers’ additions to its portfolio included Cinven and Warburg Pincus.

47the wellcoMe trust

$600M

This $24 billion endowment has one of the largest PE allocations among its kind – 28 percent – although it is favouring directs.

48international finance

corporation $550M

Among the commitments the organisa-tion made was $20 million to Armstrong Asset Management’s Southeast Asia-focused clean energy fund and $25 million to Indian SME-focused Lighthouse Funds.

49uniVersity of Michigan

$450M

During our period the $9.1 billion endow-ment committed to Advent International GPE VII, Ford Financial’s second vehicle and the fourth fund of Huron Capital, a Detroit-based lower mid-market fund.

50san francisco

eMployees’ retireMent

systeM $440M

San Francisco made $440 million in com-mitments during the LP50 qualifying period to managers including TowerBrook Capital and Battery Ventures.