New Jersey to commit $230m to private equity

The $75.6bn pension system expects to pledge €100m to CVC Fund VI and up to $100m to Vista Foundation Fund II.

The New Jersey State Investment Council plans to commit up to $230 million to two private equity funds, the pension fund’s board announced at its meeting Thursday. 

The board will commit €100 million to CVC European Equity Partners’ sixth vehicle and $100 million to Vista’s second Foundation Fund. The state’s investment staff expects to finalise both commitments soon. 

The New Jersey board said its commitment to CVC will be a core relationship for the system upon finalisation. “We went to four cities, we visited 23 managers, we met with the team and our consultant, we targeted a few managers and CVC came to the top,” Robin Clifford, a New Jersey investment analyst, said at the meeting.

New Jersey will benefit from a 1.35 percent volume discount and an 8 percent preferred return rate, according to the board meeting. CVC will contribute 3 percent to the fund with 100 percent of any transactions fees going back to LPs to offset the management fee. 

UK-based CVC has enjoyed strong demand for Fund VI, and is expected to hold a final close this month, according to Private Equity International’s Research and Analytics division. The fund has received pledges of €14 billion but will cap its fund at €10.5 billion. The fund’s initial target was €9 billion, PEI reported earlier. 

The New York State Teachers’ Retirement System committed €200 million to CVC’s fund and The Los Angeles County Employees’ Retirement System pledged €150 million, according to documents from both pension funds. 

New Jersey committed to Vista Equity’s debut foundation fund through a fund of funds, but the pension fund is trying to add more direct investments. “We’re trying to add more of our best managers and save fees by going direct from out of our fund of funds,” said Jason MacDonald, a senior portfolio manager for the state’s investment division.

New Jersey’s commitment comes in time for the second close of Vista Equity’s Foundation Fund II, as stated at the board meeting. The vehicle launched earlier this year and has surpassed its initial $500 million target. The expectation is that the fund could reach just about $1 billion, according to one person with knowledge of the situation.

Foundation Fund II has a “European waterfall” distribution structure, which means Vista Equity won’t start to collect carried interest until LPs receive all of their capital and a preferred return. Other LPs include the Oregon Investment Council and the Illinois Municipal Retirement Fund, according to the board meeting.

The State Investment Council of New Jersey also announced a reduced commitment to Marlin Equity Fund IV from $100 million to $75 million. The fund closed on $1.6 billion on Tuesday and was more than three times oversubscribed.

Sam Sutton contributed to this article.