Oregon commits to Blackstone separate account

The Oregon Investment Council made $950m in commitments to Blackstone, Apollo and Lone Star as it continues to be one of the most significant limited partners in the industry.

The Oregon Investment Council has committed $250 million to The Blackstone Group’s separate accounts business called Tactical Opportunities. 

The commitment (which is pending a legal review) was part of a total $950 million the council pledged to Blackstone, Apollo Global Management and Lone Star Investors – all of whom are existing managers in the state pension fund’s investment portfolio. 

Blackstone launched the Tactical Opportunities business in 2011 with a headline-grabbing partnership with the state pension system of New Jersey, which committed $750 million to the fund. Since then the firm has brought on other limited partners like the California Public Employees’ Retirement System, which committed $500 million last year. 

Blackstone reported in its Q1 earnings call in April that it had raised a total of $2.6 billion for the separate accounts business, bringing in $1 billion alone in the first quarter. Tony James, Blackstone's president, reported earlier this month that Tactical Opportunities had raised $2.7 billion. It’s understood the Oregon commitment is on top of the $2.7 billion total. 

Tony James

Tactical Opportunities uses capital on a quick and opportunistic basis around strategies like credit and real assets investing. Many of the investments in the portfolio have a current yield aspect. 

Blackstone continues to see demand from LPs for the separate accounts business, Tony James, the firm’s president, said during the earnings call. 

“There is no business [right now] that is as interesting and exciting as Tactical Opportunities,” he said. “The returns are exceeding our expectations.” Blackstone closed on “10 to 12 transactions”, James said. Tactical Opportunities is something like a traditional private equity fund, though there is no cap on how much the firm can raise for the strategy and it has a three-year investment period, Blackstone chief executive officer Steve Schwarzman said during the earnings call. 

Oregon, meanwhile, also committed, pending terms and commitments negotiations, $300 million to Apollo Global Management’s Fund VIII, which is targeting $12 billion with no hard-cap. Investment staff will continue to negotiate with Apollo to try and get the firm to ramp up percentage of any transaction fees it uses to offset the management fee, according to pension staff documents. 

Oregon also has committed $200 million to Apollo Fund VI in 2006 and $400 million to Apollo Fund VII in 2008.

Council also authorised a commitment of $400 million to Lone Star Fund VIII, which is targeting $5 billion for distressed investments in loans and securities, including single family residential, corporate and consumer debt products and financially-oriented and asset rich operating companies, according to pension documents. Oregon has invested in all of Lone Star’s previous funds, and is one of the state’s most significant relationships (including its largest real estate manager relationship), according to pension documents. 

The pension system remains one of the most active in fund commitments in the industry, with a commitment pace of $2 billion a year as it works to hit its long-term allocation target of 16 percent, pension documents said.