LP Radar: Detroit’s private equity problem

In July, Detroit declared the largest municipal bankruptcy in US history, suffocating under a mountain of debt. What this means for the city’s creditors – including city workers and retirees guaranteed pensions – remains to be seen. 

One question among the many related to the city’s Chapter 9 bankruptcy filing (which as of press time hadn’t yet been approved by a bankruptcy judge) was the future of the private equity holdings within its municipal pension funds.

Detroit does not have significant amounts of private equity in its two major pension funds, the $2 billion General Retirement System and the $3.1 billion Police and Fire Retirement System. The systems don’t specifically break out their private equity holdings from other “externally managed” assets, although they do list their holdings.

The General Retirement System, for example, is a limited partner in several funds managed by Wind Point Partners, a Chicago-based firm that invests in the mid-market. Its portfolio also includes LP stakes in Tailwind Capital Partners, Syndicated Communications Ventures, Court Square Capital Partners, Perseus Partners VII, GSC Partners I and II and Falconhead Capital Partners II. 

The Police and Fire Retirement System has many of the same private equity holdings as the General Retirement System, according to both systems’ annual reports for 2011 (the most recent reports available on the website).