Gregory Roth

Vista Equity Partners has apparently begun raising its next fund, Vista Equity Partners IV. The San Francisco-based private equity firm, which focuses on software and technology firms, has total committed capital of $2.7 billion, according to the firm’s Web site. Vista was founded in 2000. The previous fund in the series, Fund III, closed in 2008, having raised $1.3 billion. The new fund was revealed as an agenda item for Thursday’s forthcoming meeting of the New Jersey State Investment Council. No word yet as to the size of the proposed commitment nor the fundraising target of the fund itself. Last year, Vista introduced a fund in a new series, Foundation Fund I, which held an interim close after having raised $195 million of its $400 million overall target.

Some Canadian pensioners can retire a little easier knowing that the $146 billion Canada Pension Plan Investment Board stands to gain a huge 3x-plus return of about $930 million from the sale of its direct stake in Skype Technologies to Microsoft. The investment seems to be a major validation of the strategy of several large Canadian pensions to take large, direct stakes in private companies. CPPIB was one of three investors that together bought a 65 percent stake in Skype from Ebay in 2009, the others being buyout shop Silver Lake and venture firm Andreessen Horowitz. Skype’s founders and Ebay retained the rest of the company, about 35 percent.

Less than a month after New York’s former comptroller was put in prison for a corruption scheme involving the New York Common Retirement Fund, New Mexico’s pension system filed two lawsuits, one in federal court and the other in state court, seeking damages and restitution from its own pay-to-play scandal. New Mexico’s scandal allegedly involves the state’s former pension chief as well as close associates of former Gov. Bill Richardson. In addition, the suits name many of the same people implicated or found guilty in the New York scheme. The federal suit targets defendants living outside New Mexico, while the state case is aimed at defendants in the state, according to sister magazine Buyouts. Both suits were filed by the New Mexico State Investment Council, which manages $15 billion in pension funds.

The Connecticut Retirement Plans and Trust Funds announced that its chief investment officer, M. Timothy Corbett, planned to step down to become chief investment officer and executive vice president of the Massachusetts Mutual Life Insurance Company. Connecticut’s state pensions have $2.1 billion in private equity and venture capital, about 9 percent of the system’s $25 billion in assets. The system’s overall private investment target is 10 percent. Corbett was responsible for the pensions’ investments and strategic planning. His resignation is effective on Friday, May 20th. He starts in his new role the following Monday. Mr. Corbett’s deputy at the Connecticut pension, Lee Ann Palladino, will return to the role of interim chief investment officer and will also serve as head of the Connecticut treasury’s Pension Funds Management Division. Palladino was interim CIO prior to Corbett’s CIO appointment in July 2009.

The race is on for fresh capital, especially from giant public pension funds. At the Buyouts New York conference this week, it was clear from several of our speakers that fundraising - who has the money to invest and who will get it - was the key concern among attendees. Many panelists pointed out that pension funds were looking to boost their returns, especially since many of them are facing staggering unfunded liabilities. Having lost so much during the financial crisis, pension funds are increasingly looking to private equity and other alternative investments to 'catch up.' So, without further delay, below is an outlook for private equity spending by ten of North America's largest public pension funds. [slideshow] [slide title="10 - Massachusetts Pension Reserves Investment Mgmt-'MassPRIM'"] Massachusetts Pension Reserves Investment Management Total Assets (Most Recent Figure): $48.3 billion (Dec. 31, 2011) Actual Allocation to Private Equity/Alternatives: 10.6% Value of Private Equity/Alternative Investments: $5.1 billion Target Allocation to Private Equity: 10% Plans for the Year: The board of Mass PRIM, seeing how successful the pension was in 2010 with its private equity program returning 17.1 percent, decided to green light an additional $1 billion in private equity commitments in 2011, despite the fact the fund is already over its 10 percent private equity allocation target. [slide title="9 - Oregon Public Employees' Retirement System - 'OPERS'"] Oregon Public Employees' Retirement System Total Assets (Most Recent Figure): $57.7 billion (Feb. 28, 2011) Actual Allocation to Private Equity/Alternatives: 21.3% Value of Private Equity/Alternative Investments: $12 billion Target Allocation to Private Equity: 16% Plans for the Year: Unlike Washington, which reduced its level of PE commitments in 2010, Oregon raised the amount committed to in 2010 to $2.2 billion from $800 million in 2009. In part, this was to keep pace with the flow distributions. With a very respectable 16 percent annual return for its private equity program over the last 30 years, Oregon shows no signs of letting up. Even though it is more than 5 percent over its private equity allocation target, Oregon announced earlier this year that it planned to commit $2 billion a year to private equity in 2011 and 2012, $2.3 billion in 2013 and 2014, and $2.5 billion in 2015 and 2016. [slide title="8 - New Jersey State Investment Council"] New Jersey State Investment Council Total Assets (Most Recent Figure): $72.6 billion (Feb. 28, 2011) Actual Allocation to Private Equity/Alternatives: 6.4% Value of Private Equity/Alternative Investments: $4.6 billion Target Allocation to Private Equity: The cap on alternative investments (PE, Hedge Funds and Real Estate) may soon rise to 38% from the current 28%. Plans for the Year: Facing a huge unfunded liability of $53.9 billion, or 46% of the pension's overall expected obligations, New Jersey's Investment Council is moving swiftly to raise the maximum that can be allocated to alternative investments, such as private equity,to 38 percent (from 28 percent) in an effort to pick up some of the slack. Currently, the overall alternatives portfolio makes up 17 percent of the fund's overall assets. The rule change is likely to pass in May, so it is possible that allocations to alternatives could rise soon after that. [slide title="7 - Washington State Investment Board"] Washington State Investment Board Total Assets (Most Recent Figure): $79.4 billion overall (Dec. 31, 2010) Actual Allocation to Private Equity/Alternatives: 25% of main $58.8 billion pension fund Value of Private Equity/Alternative Investments: $14.7 billion Target Allocation to Private Equity: N/A Plans for the Year: Washington State has, proportionally, one of the nation's largest PE programs, with a mega-sized 25 percent portion of assets invested in the asset class. Because it has performed so well for Washington, private equity is overrepresented in the portfolio. As a consequence, Washington has been easing up on fresh commitments, with only $900 million committed in FY2010, vs. $2.2 billion committed in 2009. Nevertheless, Washington did commit a big $500 million check earlier this year to KKR's newest fund. [slide title="6 - Teacher Retirement System of Texas - a.k.a. 'Texas Teachers'"] Teacher Retirement System of Texas Total Assets (Most Recent Figure): $105.3 billion (Dec. 31, 2010) Actual Allocation to Private Equity/Alternatives: 8.9% Value of Private Equity/Alternative Investments: $9.4 billion Target Allocation to Private Equity: 10% Plans for the Year: As Texas Teachers prepares for Brian Guthrie to replace Ronnie Jung as executive director, the fund's private equity program saw a Texas-sized 19.4 percent return in 2010. Add that to an impressive 19.7 percent average annual return for the fund's private equity program over the last 20 years. Despite those returns, the fund is actually underweight in private equity, so look for more money to be committed in the second half of the year. [slide title="5 - Ontario Teachers' Pension Plan"] Ontario Teachers' Pension Plan Total Assets (Most Recent Figure): $111.5 billion (Dec. 31, 2010) Actual Allocation to Private Equity/Alternatives: 11.2% Value of Private Equity/Alternative Investments: $12.4 billion Target Allocation to Private Equity: N/A Plans for the Year: The Ontario Teachers' in-house private equity firm has $12.4 billion under management and makes its own direct private investments, often in concert with other Canadian pensions or with other private equity firms. For the last 20 years, the returns on for the private capital group for the pension has been an extremely respectable 18.5 percent. Recently, OTPP announced that it would try to dispose of its majority stake in the Toronto Maple Leafs hockey team and the Toronto Raptors of the NBA. That a pension fund would hold direct stakes such as this, and has such a strong record doing so, indicates that the do-it-yourself Canadian system is working well. The pension has also become one of the leaders in ultra-long-term direct investments in infrastructure. [slide title="4 - New York City Retirement Systems"] New York City Retirement Systems Total Assets (Most Recent Figure): $115 billion (Jan. 31, 2011) Actual Allocation to Private Equity/Alternatives: 5.8% Value of Private Equity/Alternative Investments: $6.7 billion Target Allocation to Private Equity: N/A Plans for the Year: Led by former PE executive Larry Schloss, New York City's five pensions have in charge someone who knows the PE space. In a Buyouts interview earlier this year, Schloss said in order to to keep a $12 billion portfolio (in committed capital) reasonably static, the pensions he manages will have to add about $1.5 billion to $2 billion in new commitments a year. Given that New York has not made any big ticket commitments thus far in 2011, keep an eye out for new commitments toward the second half of the year. [slide title="3 - Florida Retirement System Pension Plan"] Florida Retirement System Pension Plan Total Assets (Most Recent Figure): $124.2 billion (Dec. 31, 2010) Actual Allocation to Private Equity/Alternatives: 4% Value of Private Equity/Alternative Investments: $5.1 billion Target Allocation to Private Equity: 5% Plans for the Year: Florida is moving to raise the allocation target for private equity to 5 percent from 4 percent. The current portfolio is 4 percent invested in private equity. The system also has a 7 percent cap on PE. [slide title="2 - California State Teachers' Retirement System - 'CalSTRS'"] California State Teachers' Retirement System Total Assets (Most Recent Figure): $150 billion (Feb. 28, 2011) Actual Allocation to Private Equity/Alternatives: 13.4% Value of Private Equity/Alternative Investments: $20 billion Target Allocation to Private Equity: 12% Plans for the Year: CalSTRS's private equity program, led by new PE Director Margot Wirth and CIO Christopher Ailman, saw a return of 17.2 percent for the year ending Sept. 30th. The fund is being managed under a new asset allocation plan that aims to better protect the pension from market upheavals like the financial crisis, when all asset classes seemed to correlate in one direction - down. The pension's private equity investments, at 13.4 percent of the portfolio, are slightly over its 12 percent target rate, making it less likely that CalSTRS will be in a hurry to make very large ticket commitments. Although CalSTRS recently announced its unfunded liabilities amounted to $56 billion, the pension was still chosen as large public fund investor of the year award from Institutional Investor magazine. [slide title="1- California Public Employees' Retirement System - 'CalPERS'"] California Public Employees' Retirement System Total Assets (Most Recent Figure): $228 billion (Jan. 31, 2011) Actual Allocation to Private Equity/Alternatives: 14.1% Value of Private Equity/Alternative Investments: $32.2 billion Target Allocation to Private Equity: 14% Plans for the Year: CalPERS is currently wrapping up its search for a new senior alternative investment officer, following the resignation nearly a year ago of Leon Shahinian in the aftermath of the pension's placement agent scandal. Much decision-making has been on hold awaiting the new appointment. In the interim, the alternative program has been directly overseen by Joe Dear, CalPERS's chief investment officer. While there haven't been any very large-ticket commitments of late, there has been an unconfirmed sale of an $800 million tranche of PE assets on the secondary market. Such a sale could be seen as a way to free up funds so the new private equity manager has a freer hand. A spokesman for CalPERS said the giant pension is exactly at its target allocation, 14 percent, but with PE distributions coming back to CalPERS, the pension would need to make some large commitments in the second half of 2011 just to maintain its current PE allocation. CalPERS will also likely use its clout with PE firms to gain access to co-investment opportunities. CalPERS is also likely to continue to own large direct stakes in several private equity firms, including Apollo, Carlyle and Silver Lake. [/slideshow]

The outlook for private equity is improving, but it is becoming increasingly hard to find opportunities at reasonable prices, said Josh Harris, a managing partner at Apollo Global Management, in an exclusive video interview with Reuters Insider at the Buyouts New York conference. Harris adds he doesn't see prices of target companies coming down until leverage begins shows signs of tightening, which probably won't happen until the Federal Reserve starts raising interest rates. Apollo is one the the world's largest private equity firms with $68 billion under management. The company went public at the end of March. Harris told Rhonda Schaffler of Reuters that private equity continues to gain favor among institutional investors, and that trend is part of a general shift toward alternative investments.

In an exclusive interview at Buyouts New York, David Rubenstein, founder and chief executive of The Carlyle Group, says that China will spend the better part of this century as the world's largest economy, making that nation an extremely attractive place to invest. But don't count out the United States yet, he said. In a conversation with Chrystia Freeland, Editor of Reuters Digital, Rubenstein also discussed the shifting tides of regulation, saying that with the passing of the Dodd-Frank law, the aspect that the financial community is most uneasy about is the absence of certainty as these new financial regulations get interpreted and implemented over the next few years. Finally, Rubenstein said that in private equity's fundraising race, sovereign wealth funds will be taking an increasing role in coming years when compared to public pension funds, which don't have as much money to invest as they did a few years ago.

The Washington State Investment Board today approved a $300 million commitment to a new fund being raised by Providence Equity Partners, the Providence Equity Partners VII, L.P. Liz Mendizabal, who heads up Public Affairs for the Washington State pension, said the state has had a longstanding relationship with Providence. “We have confidence in them and have been pleased with the results,” she said. The Olympia, Wash.-based pension, which manages $79.4 billion in assets, last made a commitment to Providence of $250 million to its previous fund, the Providence Equity Partners VI, L.P. That fund, which ultimately raised $12 billion, closed in 2007, just before the financial crisis.

Norway’s giant sovereign wealth fund, the $575 billion Government Pension Fund, anticipates a windfall this year of more than $20 billion due to sky-high oil prices. Martin Skancke, director general of the asset management department of Norway’s Ministry of Finance, tells Nick Edwards of Reuters that this windfall will soon have be invested in a variety of asset classes, although the country’s much-discussed possible entry into the private equity market seems to be on the back-burner for now.

Portfolio Advisors, one of the nation’s largest fund-of-fund managers, revealed in an SEC disclosure that it has already raised at least $200 million for its newest fund, Portfolio Advisors Private Equity Fund VII LP. In referring to the company's previous two funds, which closed in 2011 and 2008, Paul Crotty, a managing director, said that his firm was "gratified to have succeeded in a very difficult fund-raising environment." The Darien, Conn.-based asset manager, which oversees $60 billion in assets, revealed just last week that it had made its final close on Fund VI after having raised $1.1 billion. Fund V, which closed in 2008, had raised a similar amount. While Crotty said he was prohibited from discussing funds that were currently seeking money, he did say that for Funds V and VI, the firm felt that $1 billion was an ideal size "because it translates to appropriate and available commitment sizes with the best available fund managers."