Oregon ups private equity allocation to 20%

The $63bn retirement fund will gradually increase its target allocation to private equity from 16% during the next three to five years.

The Oregon Investment Council has increased the private equity target allocation for the Oregon Public Employees Retirement Fund from 16 percent to 20 percent.

The move came last week following an asset liability study conducted by Strategic Investment Solutions, an independent institutional investment consultant, on behalf of the $63 billion fund. The changes, which will be phased in over the next three to five years, decreased the target allocation to public equity and fixed income.

While the target allocation to private equity has been increased, the revised target of 20 percent is still lower than Oregon’s existing actual allocation to the asset class.

“If you look at our allocation today, private equity is responsible for about 22 percent of the assets under management, so we were way over the 16 percent target,” Oregon spokesman James Sinks told Private Equity International. “That’s really a reflection of how successful private equity has been compared to the other parts of the portfolio.”

The revised investment mix will generate an estimated long-term projected annual return of 7.9 percent, according to a statement from Oregon State Treasurer Ted Wheeler. 

The Oregon Investment Council continues to be “very bullish” on private equity as an asset class, Sinks said, having committed an additional $250 million to Kohlberg Kravis Roberts North America Fund XI in May, boosting its total allocation to the fund to $775 million. 

Also in May, Oregon authorised a $250 million commitment to The Blackstone Group’s separately managed accounts business as a way to “enable greater and timelier access to attractive opportunistic investments that [the pension system] might miss otherwise”, according to pension documents. 

This year, Oregon has committed $575 million to six private equity funds: Chinese private equity firm CDH Investments’ Fund V, HarbourVest Partners’ 2012 Direct Fund, KKR’s Asian Fund II, Nordic Capital VIII, Pine Brook Capital Partners II and Hong Kong- and Singapore-based RRJ Capital’s Master Fund II.