San Diego city pension ramps up co-investments

The $4.3bn pension will allocate more of its capital for private equity to co-investment opportunities. In the last nine months, SDCERS has committed to Avista, Alchemy, Macquarie and Veritas.

The San Diego City Employees’ Retirement System, a $4.3 billion pension plan, will focus more on co-investments going forward as there are “a variety of opportunities at the current time in different parts of the market”.

The pension, which gave Credit Suisse a $150 million mandate for private equity investing last year, has made four commitments over the year. SDCERS committed $8 million each to Alchemy Special Opportunities Fund II and Avista Capital Partners II. Alchemy is reportedly looking to raise £500 million for its second distressed investment fund, while Avista Capital closed its second fund on $1.8 billion earlier this year.

One of the guiding principles of the programme will be to invest in 'fewer better managers'.

Credit Suisse

The pension also committed $8.6 million to Macquarie European Infrastructure Fund, targeting €1 billion, and $10 million to The Veritas Capital Partners IV, which closed its fund earlier this year on $1.2 billion.

Credit Suisse updated the San Diego board on the private equity programme earlier this week. The updated plan calls for the pension to use 30 percent of capital dedicated to private equity for co-investing, up from 20 percent.

Amounts for potential co-investments range from $2 million to $7 million.

SDCERS target for private equity is 5 percent, and the pension looks to invest $40 million to $60 million annually. In the nine months that Credit Suisse has been working with the pension, the programme has put out $34.6 million in commitments, with out $13 million called.

“One of the guiding principles of the programme will be to invest in “fewer better managers”, Credit Suisse said in its updated report. “By focusing on a select group of managers who are best to outperform their competitors, we will position the fund to outperform over the long term.”

SDCERS other private equity advisor is the StepStone Group, which will be giving an updated programme report this month.

The pension approved private equity as an asset class in 2007.