Despite reduction, Oregon has billions for PE

Oregon’s public employees’ pension is reducing its commitment pace to private equity, but still has $2bn for the asset class this year.

Oregon’s public employees’ pension, one of the earliest and most active private equity limited partners in the market, plans to commit $2 billion to private equity this year.

The pension has already spent $500 million of that amount in a major commitment to Kohlberg Kravis Roberts' eleventh North American fund.

The $2 billion for 2011 is actually less than the pension had originally anticipated. Oregon is reducing its commitment pace to bring the pension back within its target 12 to 20 percent allocation range to private equity.

Significantly, for managers already in Oregon’s portfolio, the bulk of the $2 billion in 2011 will be used for re-ups, according to Oregon pension documents. 

There is a strong pipeline of existing managers who will be fundraising in 2011, and we anticipate 2011 commitments will be primarily re-ups with existing partners, and most at lower amounts than in the prior funds.

OregonPERF

However, like other public pensions in the US, Oregon is likely to commit less to existing managers this year. Oregon’s $500 million commitment to KKR’s eleventh North American fund was about $800 million less than its $1.3 billion allocation to the firm’s 2006 flagship private equity fund.

“There is a strong pipeline of existing managers who will be fundraising in 2011, and we anticipate 2011 commitments will be primarily re-ups with existing partners, and mostly at lower amounts than in the prior funds,” the pension said in meeting documents.

Oregon put more than $4.5 billion to work with private equity managers in 2006. The pension dramatically slowed commitments in 2009, allocating about $800 million, but jumped back up to around $2 billion last year.

Pacific Corporate Group Asset Management, Oregon's private equity advisor, presented the Oregon Investment Council with a pacing study at the meeting in February.

The study also included a chart of Oregon's longest relationships. KKR has been an LP for about 29 years and has produced an 18 percent internal rate of return over that time period. TPG has been with Oregon for 16.2 years and has produced a 15.8 percent IRR, and First Reserve, which has been one of the pension's GPs for almost 10 years, has generated a 29.3 percent IRR.