Louisiana pivots from Parish to StepStone

StepStone is in the process of acquiring $2bn fund of funds Parish Capital Advisors, and part of that transaction includes gaining approval of Parish’s LPs.

The $9.2 billion Louisiana State Employees’ Retirement System has chosen to switch about $80 million in commitments from fund of funds Parish Capital Advisors to the StepStone Group.

StepStone announced it would acquire Parish in November in a deal that is expected to close in early 2012. As part of the acquisition, some portion of LPs in Parish’s funds have to approve the change of managers – generally a manager switch requires a two-thirds approval. In this case, however, it’s not clear what the approval threshold was.

StepStone declined to comment.

Other LPs in Parish funds include the California Public Employees’ Retirement System, the Missouri State Employees’ Retirement System, the Los Angeles City Employees’ Retirement System and the Connecticut state treasury.

Louisiana State Employees’ had committed $50 million to Parish’s second fund and $30 million to its second European-focused fund. Parish’s European funds will continue to be managed by the fund of funds’ European team, headed by David Jeffrey, according to Laney Sanders, manager of private equity with the pension’s system.

Parish Capital II was generating a 1.1x return multiple and a 4.1 percent internal rate of return as of 31 March, according to performance numbers from CalPERS.

Prior to making the decision to change managers, the pension system “met the Parish team and the CEO of StepStone” and also had “numerous calls to clear up any questions”, according to Sanders.

In other news, the pension system this week also committed an additional $50 million to Apollo European Principal Finance Fund II, bringing its total commitment to the fund to $100 million. The pension system decided to boost its commitment to the fund because “we believe that there is a lot of opportunity for favourable returns moving forward in the European distressed debt space”, Sanders said.

Apollo launched the European Principal Finance fund series in 2007 to focus on loans held by European financial institutions that are in default on principal or interest payments for 90 days or more. As of 30 September, the operation had more than $1.7 billion under management, according to Apollo’s website. Louisiana also committed $50 million to Oaktree’s third European distressed debt fund earlier this year.

The pension system has been investing in private equity for 16 years, and has a target of 12 percent and an actual allocation of about 12 percent.