The Public School Employees’ Retirement System of Pennsylvania has approved up to $400 million in commitments to two private equity funds, according to pension documents.
The $50 billion pension fund invested up to $200 million in Apollo Investment Fund VIII. The 2012 vintage fund is targeting $12 billion and has a $15 billion hard-cap, though Apollo is considering seeking approval to increase its hard-cap after investors expressed interest in committing up to $20 billion, according to a Bloomberg report. Any decision to increase the limit would have to be approved by LPs and even if approved, the firm could still keep the $15 billion hard-cap.
Apollo declined to comment.
Fund VIII had raised $9.6 billion as of September, with a final close expected before the end of the year, according to documents from PSERS’ consultant Portfolio Advisors. Investors in Fund VIII include the Teachers’ Retirement System of Louisiana and the Kansas Public Employees Retirement System, according to Private Equity International’s Research and Analytics division.
Apollo will target investments of $300 million to $1.5 billion across 20 to 25 distressed investments, corporate carve-outs and opportunistic buyouts. The firm will be able to invest up to 35 percent of capital in the fund outside of North America, primarily in Western Europe.
Apollo’s prior fund, a 2008 vintage, raised $14.68 billion while its 2006 vintage vehicle raised $10.14 billion, according to PEI data. As of 31 March, Fund VII had a return multiple of 1.6x and an internal return rate of return of 28 percent, according to pension documents.
Raising more than $15 billion is a feat only a few private equity firms have accomplished post-2008. The Blackstone Group’s 2011 vintage fund raised $16.27 billion, though its 2005 fund collected $22.4 billion. TPG’s latest fund is targeting $12 billion, while its 2008 vintage Fund VI raised $18.87 billion. Kohlberg Kravis Roberts hasn’t cracked the $15 billion limit since its KKR Associates 2006 fund closed on $17.64 billion, according to PEI data. Its latest North American fund has a $10 billion target.
PSERS also committed up to $200 million to Summit Partners Credit Fund II, which is targeting $750 million and is expected to hold a first close sometime this month, according to documents from Portfolio Advisors. The fund will focus on recapitalisations, rescue financings, distressed situations/debtor-in-possession financing, bridge loans and growth capital. The fund is separate from Summit's subordinated debt vehicles, which provide mezzanine financing into Summit deals. Summit’s credit strategy typically targets companies in sectors including the financial and business services, media, technology and consumer products, according to the firm’s website.