CalSTRS commits $775m to private equity

The $170bn system committed to funds managed by Carlyle, CVC, Energy Capital and Onex.

The California State Teachers’ Retirement System committed $775 million to four buyout funds during the fourth quarter of 2013, according to documents released by the $170.5 billion system.

CalSTRS committed $250 million to The Carlyle Group’s Carlyle Partners Fund VI, which closed in November 2013 on $13 billion, above its $12 billion hard-cap and $10 billion target. The fund came to market in late 2011 and attracted 269 investors from 43 countries, according to the firm. Fund VI will invest in large buyout transactions primarily in the US, according to the CalSTRS documents.

Carlyle had its strongest fundraising year in 2013, raising a total of $22 billion of new capital, Carlyle co-chief executive officer David Rubenstein said on an earnings call last week. CalSTRS has previously committed to four other Carlyle funds, according to a spokesperson from the pension system.

CalSTRS also committed $200 million each to Energy Capital Partners Fund III and Onex Corporation’s Onex Partners Fund IV. Energy Capital launched in 2013 with a $3.5 billion target and received commitments from limited partners such as the New York State Teachers’ Retirement System and the Teachers’ Retirement System of Louisiana, according to Private Equity International’s Research and Analytics Division. Energy Capital invests in North American energy infrastructure assets.

Onex is nearing its $4.5 billion target and had raised $3.65 billion as of last week, according to documents filed with the US Securities and Exchange Commission.  Fund IV will also include a general partner commitment of about $1.2 billion. LPs in the fund include the Massachusetts Pension Reserves Investment Management Board and The Public Employees Retirement Association of New Mexico, according to PEI data. Onex invests in large-scale North American businesses.

CalSTRS also invested $125 million in CVC Capital Partners Asia Pacific Fund IV, which has raised about $3 billion toward a $3.5 billion target, according to a source with direct knowledge of the matter. Fund IV will invest in Greater China, Southeast Asia, Japan and Korea and will focus on the consumer sector. CVC will not invest in India or Australia after its failed investment in Nine Entertainment.

CalSTRS also committed about $129 million across three co-investments during the fourth quarter. The system invested $55 million alongside CVC Capital Partners in Chinese education consultancy EIC Group and invested $40 million alongside Kohlberg Kravis Roberts in landscape maintenance and snow removal company Brickman. KKR acquired the company last November from Leonard Green & Partners for $1.6 billion. CalSTRS’ third co-investment was a €25 million ($34 million; £20 million) investment alongside BC Partners in pharmaceuticals company Aenova.

CalSTRS has invested about $2 billion per year in private equity for the past few years, according to the spokesperson.

Last September, CalSTRS upped its target allocation to the asset class from 12 percent to 13 percent, PEI reported. The new target allocation is expected to take three years to implement. 

CalSTRS’ private equity portfolio is valued at $21.5 billion and includes more than 300 commitments with more than 120 firms, as of 31 January.