Pennsylvania delays follow-on commitments

The $29.3bn Pennsylvania State Employees’ Retirement System has put off approving commitments to two private equity and two venture funds, including Hellman & Friedman’s latest vehicle. The pension reported an investment return of -14.4% through the third quarter.

The Pennsylvania State Employees’ Retirement System (PA SERS) has delayed follow-on commitments to four private equity funds due to what a spokesman called an “uncertain market environment”.

At a board meeting held earlier today, the $29.3 billion pension put off investing in funds currently being raised by Hellman & Friedman, TL Ventures, Lime Rock Resources and Novitas Capital.

Commitments to those funds were listed as action items on PA SERS’ agenda documents. For most pensions that invest in alternatives, if follow-on commitments appear on board agendas they are typically approved.

A PA SERS spokesman said he could not legally disclose the amounts of the respective follow-on commitments until they were voted on.

Like many other institutional investors, PA SERS has been hit hard by the recent downturn in the public markets, causing its actual allocation to alternatives to become heavily overweighted.
As of 30 September, PA SERS maintained an actual allocation to private equity and venture capital of 20 percent, versus a target of 14 percent.  

The pension’s total value has dropped $4.3 billion from 30 June to 30 September. Late last month, PA SERS reported an investment return of -14.4 percent through the third quarter of 2008, which matched the media performance by large public pensions as reported by the Wilshire Trust Universe Comparison Service.

“The SERS fund is broadly diversified globally and across asset classes, and in the past, that diversification has helped to protect the fund when individual asset classes underperformed,” chief investment officer John Winchester said in a statement. “In the current market environment, however, virtually all asset classes and all global markets have been falling.”

PA SERS has invested in four prior Hellman & Friedman vehicles, totaling more than $330 million in commitments to the San Francisco-based firm, as of last year. Details of the fund were not disclosed.

The pension committed $20 million to Lime Rock Resources’ prior fund. The Houston based firm, which shares a strategic relationship with energy investment giant Lime Rock partners, invests in low-risk oil- and gas-related properties throughout the US.

PA SERS has committed $90 million across three prior TL Ventures Fund. The Philadelphia- and San Francisco-based firm targets early stage, technology-enabled companies.