Oregon to focus foreign PE exposure on global funds

The Oregon State Treasury’s international private equity exposure, so far divided between Europe, Asia-Pacific and global, will hone in on the latter as it curtails its number of GP relationships.

The Oregon State Treasury’s Oregon Public Employees Retirement Fund will concentrate its international private equity exposure more through global funds than via region-specific funds, according to Oregon’s state investment council meeting material from 1 February.

Salem-based Oregon State Treasury, which allocates 16.4 percent of its $87 billion pension fund to private equity, has been investing in the asset class since 1981.

Oregon wrote in the material that OPERF’s international exposure will increasingly come from global fund commitments, as the pension fund continues narrowing its private equity commitments to a smaller number of fund managers.

In the meeting materials, Oregon indicated that 77 percent, or $10.9 billion, of OPERF’s private equity fund commitments were in North America as of 30 September. OPERF also allocated 10 percent, or $1.5 billion, of its private equity fund commitments to Europe; 5 percent, or $614 million, to Asia-Pacific; and 8 percent, or $1 billion, to global strategies.

OPERF has a target allocation of between 20 percent and 40 percent to international markets, and sits at the lower end of this range, with the international market value representing 23 percent of the private equity portfolio. With the addition of the unfunded portion, the total exposure represents 26 percent, the material showed.

During the 2016 calendar year, Oregon approved 10 private equity commitments totalling $2.4 billion in various geographies. Some of the largest cheques written by Oregon include $500 million to North America-focused Vista Equity Partners Fund VI, which launched last year with an $8 billion target; $250 million to globally-oriented Apax IX, which was one of the largest private equity funds that closed last year; and $238.5 million to Europe-focused TDR Capital Fund IV, which held a first close on over €2 billion in December.

Overall, OPERF’s private equity programme, which also includes distressed and venture capital strategies, committed 67 percent to domestic funds and 33 percent to international totalling $3 billion in 2016, according to the meeting material.

OPERF plans to continue its annual target commitment pacing of $2.5 billion to $3.5 billion for the next three years and plans to make 10 to 15 commitments, each averaging $250 million to $300 million.

As it makes new commitments this year, OPERF will continue to seek fee discount opportunities through large and first-close commitments, it said, and build on its due diligence capacity that was enhanced last year.

The meeting material indicated that, as of 30 June, OPERF’s private equity programme was generating a 15.4 percent internal rate of return since inception. The OPERF spokesman said this value reflected an IRR net of fees.