Pennsylvania Schools re-ups $200m to Bain, New Mountain(2)

In his recommendation, Public School Employees’ Retirement System of Pennsylvania’s private markets chief Charles Spiller called Bain’s operational capabilities a ‘competitive advantage’ over the firm’s peers.

The Public School Employees’ Retirement System of Pennsylvania board of trustees approved $200 million in private equity re-ups at its meeting last week, according to documents. 

The $49.7 billion retirement system committed up to $100 million each to Bain Capital Fund XI and New Mountain Partners VI, according to documents. The $100 million commitment to New Mountain is PSERS’ fourth investment with the firm. PSERS previously invested $100 million million to Bain Asia II in 2011, along with $1.6 billion across four funds managed by Bain credit affiliate Sankaty Advisors, according to documents. 

Bain is targeting $6 billion with a $7.5 billion hard-cap for its latest flagship fund. The fund will invest between $200 million and $500 million in equity per deal, but has the ability to invest up to $1 billion in larger transactions, according to a recommendation from PSERS managing director of private markets and real estate Charles Spiller. 

The fund will likely target investments in the consumer, retail, dining, technology, media, telecom, industrials, energy, business, financial services and healthcare sectors. 

“In what is likely to be a low growth environment for developed economies, Bain’s operational capabilities will be critical to driving growth in the portfolio,” according to Spiller’s recommendation. “Bain is also well-positioned to acquire companies that are characterised by complexity from either due diligence and/or an operational perspective. Bain’s deep and diverse capabilities represent a competitive advantage over their peers.”

Bain X, a $10.7 billion 2008 vintage, had netted a 1x multiple and 0 percent internal rate of return as of 30 September, according to PSERS documents. The firm’s 2006 vintage had generated a 1.3x and 6 percent IRR as of the same date. 

PSERS also committed up to $100 million to New Mountain Partners IV, which is targeting $3 billion for North American mid-market investments, according to PSERS documents. 

As with prior New Mountain vehicles, Fund IV’s portfolio will ultimately include 16 to 20 companies. The fund also will offer co-investment opportunities, according to documents. 

New Mountain Partners III, a $5.12 billion 2007 vintage, had generated 1.19x multiple and 8.07 percent IRR as of 30 September, according to PSERs documents. 

“New Mountain believes there continues to be acyclical middle market defensive growth specialty sectors which are fragmented enough that the firm has a good probability of finding an undermanaged or undervalued company to which it can apply its proven business improvement model,” according to a recommendation from PSERS investment analyst Michael Tyler. 

As of 31 December, PSERS had a 16.4 percent allocation to private equity. The retirement system’s private equity portfolio was valued at $8.04 billion.