The Pennsylvania State Employees’ Retirement System, which has embarked on a major overhaul of its alternatives programme, has committed $50 million to Advent International GPE VII.
Advent’s seventh fund is targeting €7 billion and is said to be on a trajectory to land a final close this year, sources say, though that could not be confirmed by the firm. The fund has a European and North American geographic focus. Several market sources have said Advent’s fundraising will be one of the quickest this year.
PA SERS previously committed $35 million to Advent International GPE VI, $30 million to Advent Latin America PR Fund IV and $15 million to Advent Latin America PE Fund V. Advent typically invests in upper mid-market companies in the business and financial services, healthcare, industrial, retail/consumer and technology, media and telecom sectors.
PA SERS has also committed an additional $10 million to private equity real estate firm BPG Properties’ ninth fund following an initial commitment of $15 million in January 2011. The pension previously committed to BPG Investment Partnership V, VI, VII and VIII.
PA SERS increased its commitment to the fund “for a number of reasons”, a spokesperson for the pension told Private Equity International. BPG’s eighth fund returned $9 million of a previous PA SERS’ commitment back to the retirement system “due to the limited investment opportunities in the real estate market at that time”, the spokesperson said. BPG is also “seeing more opportunities opening up as lenders have begun to sell-off foreclosed real estate”, according to the spokesperson.
PA SERS, which manages $25 billion in assets, is currently pursuing a number of strategic initiatives as part of a plan to cut its current allocation to alternatives from 27 percent to 14 percent over 10 years. The pension aims to reduce investment fees, emphasising separate – not commingled – investment mandates and limit total new commitments to alternatives at $500 million per year.
Significantly, PA SERS plans to do this for now without using the secondaries market, according to a spokesperson. As part of its 2012-2013 strategic investment plan, the pension will work to reduce general partner relationships from 149 to between 60 and 80 in five years and between 40 and 50 in ten years.
Private equity, which accounts for 63 percent of its current alternatives exposure, would increase to 65 percent after five years and remain at that level for the following five years, according to pension documents.