Investor Base: Closing in on 8%

At the end of January, the $15.5 billion Ohio Police & Fire Pension Fund in Cleveland announced that it had signed off on a €43 million commitment to Rhône Partners V, the latest mid-market-focused offering from the secretive Rhône Group. Founded in 1995 by Lazard Freres investment banking veterans Robert Agostinelli and Steven Langman, Rhône has a reputation for playing things close to it’s chest, and is a universal non-comment when it comes to the media. Few of the firm’s investments are ever announced publicly. The minimalist Rhône website consists of a landing page with a logo and a “partner” log-in, nothing more.

Yet the tightlipped approach doesn’t appear to turn investors off. To the contrary: Rhône funds tend to raise quickly, and pension funds seem to be lining up for the latest offering, too. According to meeting notes from Ohio, the fund’s target size is €1.8 billion, and the vehicle will look to acquire mid-market businesses through carve-outs, management buyouts and recapitalisations in North America and Europe. Rhône Group has offices in New York, London and Paris.

Another loyal supporter of the firm is the $45 billion Illinois Teachers’ Retirement System (TRS). In December, the TRS board also approved an investment in Rhone Capital V, according to meeting documents. The pension is planning to put in up to €100 million, noting that if the fund meets its target, the commitment will be reduced to €75 million. Illinois was an investor in Rhone’s fourth fund, a 2011 vintage vehicle which closed on €1.13 billion. Other investors in that fund include the Oregon Public Employees Retirement Fund.

For Ohio Police & Fire, according to spokesman David Graham, the commitment is part of the pension’s efforts to increase its overall allocation to private equity with a diverse group of GPs. “The target is 8 percent of the total portfolio. Currently we are just over 5 percent ($725 million),” Graham told Private Equity International. He said the increase was part of the pension’s 2012 allocation plan, and has held through updates to that plan in 2014 and 2015. At its most recent meeting, the pension approved a new private markets investment programme for 2015, which calls for aggregate capital commitments of $325 million through January 2016.

In addition to ramping up its private equity portfolio, the pension is also working to meet a long-term policy benchmark of having 12 percent of total assets invested in real estate, which currently accounts for 9.7 percent, and 5 percent in timber (currently 1.3 percent).