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Detroit pension moves forward with private equity

The bankrupt city’s $2bn General Retirement System will interview Landmark and Lexington as it searches for a manager to run a $15m allocation to private equity secondaries.

Detroit’s $2 billion General Retirement System is moving forward with its private equity programme despite the city’s historic bankruptcy filing. 

The system, one of two major city pension funds, will conduct interviews with Lexington Partners and Landmark Partners as it looks for a manager to run a $15 million secondaries allocation that was part of the system’s recent private equity strategic plan, according to senior investment officer Ryan Bigelow. 

The system is not interested in selling any of its private equity holdings at this time, Bigelow said. 

“Secondaries provide the system with vintage year exposures in years where the board did not make allocation to private equity for a number of reasons,” Bigelow said, adding the system wants to build exposure to secondaries for “additional [private equity] programme diversification, the attractive profile of secondaries that offer downside return protection of acquiring assets at discounts, J-curve mitigation, access to top tier GPs.”

Detroit

Detroit filed the largest municipal bankruptcy in US history in July, buried under a mountain of debt, the bulk of which came from retirement payment obligations to retirees. A judge has yet to approve the bankruptcy, known as a Chapter 9 filing. 

Detroit’s two municipal pension funds – the General Retirement System and the Police & Fire Retirement System – have small private equity portfolios. The programmes include holdings in firms like Wind Point Partners, Tailwind Capital Partners, Syndicated Communications Ventures, Court Square Capital Partners, Perseus Partners VII and Falconhead Capital Partners II, according to documents from both systems. 

It’s not clear how the pension funds would be affected by the bankruptcy or if they are even part of the city’s filing, but for now the General Retirement System intends to keep investing. 

“We will continue to move forward with strategies and initiatives as part of our fiduciary duty to the participants of the system,” Bigelow told Private Equity International Wednesday. Calls to the city’s emerging manager Kevin Orr were not returned.