The $12.4 billion New Mexico Public Employees’ Retirement Association is considering committing $20 million to Oaktree Capital Management’s European Principal Fund III, a distressed debt vehicle.
Oaktree is targeting €2.5 billion to €3 billion for the fund, which has no hard-cap and will focus on distressed debt investments in mid-market European companies. Oaktree raised €1.8 billion for its second European Principal Fund in 2008.
In February, the San Diego County Employees’ Retirement Association committed €60 million to the fund, which held an initial close in December 2010 just after it launched, though it’s not clear how much the fund raised by the first close. Fund III will target investments in equity and debt obligations of mid-market companies in Europe that are “undervalued” because of financial distress, dislocation, owners who are forced to sell or similar situations, according to documents from San Diego County.
Fund III will invest in control situations, or situations in which the firm can have “significant influence” over restructurings. That could mean investing in some of the assets expected to be divested by European banks this year.
Oaktree will charge a 1.75 percent management fee during the five year investment period, after which the firm will charge 1.75 percent of the lesser of funded capital commitments and cost basis of held investments. Oaktree will use 100 percent of transaction and similar fees to offset the management fee for limited partners, according to pension documents.
The European Principal team is headed by Caleb Kramer, managing director, who joined Oaktree in 2000 from Seneca Capital Partners. Other managing directors on the team include Karim Khairallah, Oren Peleg and Justin Bickle.
New Mexico PERA has about $130 million budgeted for private equity this year, and has already committed about half that amount to three firms – JMI Equity VII, GTCR X and Hellman & Friedman VII. The pension has a 5 percent target allocation to the asset class and an actual allocation of approximately 2.96 percent.
Last year, the New Mexico PERA committed $20 million to Draper Fisher Jurvetson’s Fund X, which is targeting $400 million for venture investments, and $20 million to HIG Bayside’s Loan Opportunity Fund II, a distressed debt investment vehicle.