New Jersey commits $400m to PE

The State Investment Council has backed new funds from Onex and Vista. 

The New Jersey Division of Investment has committed $200 million each to Onex Partners IV and Vista Equity Partners Fund V, according to board meeting documents from The State Investment Council, which oversees the investment division.

Onex Partners, the private equity arm of Onex Corporation, has a $4.5 billion target and a $5 billion hard-cap for its fourth buyout fund. Fund IV had collected $3.6 billion as of the end of February, according to documents filed with the US Securities and Exchange Commission.

Its parent company will commit $1.2 billion to the fund, while members of the investment team will personally commit between 2 and 8 percent of the fund – potentially as much as $400 million – according to New Jersey documents.

Onex declined to comment.

Limited partners in Fund IV will pay a management fee of 1.75 percent on commitments up to $3 billion, and 1.5 percent on commitments greater than $3 billion, with a preferred return of 8 percent and 20 percent carried interest. The fund has a 100 percent fee offset. Fund IV has also received a $200 million commitment from The California State Teachers’ Retirement System and a $50 million commitment from The Texas County & District Retirement System, according to Private Equity International’s Research and Analytics division.

Onex’s prior fund, Onex Partners III, closed on $4.7 billion in 2009 and was generating a net internal rate of return of 7.6 percent as of 30 September 2013, according to New Jersey documents. Onex Partners makes mid-market buyout investments in North America.

New Jersey has also committed $200 million to Vista Equity Partners Fund V, which launched in early February with a $3.5 billion target. Fund V has no official hard-cap and is expected to hold a first close later this month, according to documents from The Los Angeles County Employees Retirement System, which also committed $200 million to the fund. Fund V will include a GP commitment of 2 percent or $70 million and is expected to be oversubscribed.

LPs in Fund V will pay a management fee of 1 percent with a preferred return of 10 percent and 30 percent carried interest, or a 1.5 percent management fee with a preferred return of 8 percent and 20 percent carried interest, according to LACERS documents. Other LPs include The Illinois Municipal Fund and The Kansas Public Employees Retirement System, according to PEI data.

New Jersey previously committed $200 million to Vista Equity Partners IV, a 2011 vintage fund that closed on $3.5 billion. Fund IV was generating a 4.67 percent net IRR as of 30 September 2013. New Jersey also previously committed $100 million to Vista Equity Partners III and $75 million to Vista Foundation Fund II, which makes investments of $100 million or less in lower mid-market software and technology companies. Vista invests in the enterprise software industry, which spans across the healthcare, real estate and financial services sectors.

Last week, New Jersey appointed deputy director Christopher McDonough as investment director, McDonough confirmed in an email to PEI. Former director Timothy Walsh stepped down last August to become president and chief operating officer of Gaw North America, which is part of Hong Kong-based real estate fund manager, Gaw Capital Partners. After Walsh’s departure, The State Investment Council formed a search committee to consider both internal and external candidates. The council had planned to hire a new director by the start of 2014, PEI reported.

New Jersey has an 8.5 percent target allocation to private equity, excluding debt-related private equity, and an actual allocation of about 7 percent, as of 31 January. The fund has $75.1 billion of assets as of 31 January, according to New Jersey documents.