San Diego pension sells Brazos III stake for $1

The pension, which has also doubled its allocation to private equity, cited 'disclosure issues' and no deal activity as reasons it transferred its $14.4m Brazos stake to AlpInvest.

The San Diego County Employees' Retirement Association has terminated its relationship with Brazos Private Equity Partners, transferring its full stake, or $14.5 million in uncalled commitments, in Fund III to AlpInvest for $1.

The sale was detailed in documents related to the pension’s latest investment meeting, at which it also doubled its private equity allocation to 10 percent. “We think there are advantages to investing in private markets over the public markets and have increased our allocation to reflect that,” a spokesperson for the $7 billion pension said.

The pension committed $15 million to Brazos’ third buyout fund in 2008. Brazos III, which closed in 2008, raised $700 million for investments in the US lower mid-market. San Diego said it decided to end its relationship with Brazos for several reasons, including that the firm “has not made any investments” from the fund, according to pension documents. Despite the lack of deal activity, SDCERA paid out $452,000 in management and related fees to the firm.

The pension also said it terminated the relationship because it wants to build a private equity portfolio with managers who are “comfortable with current disclosure-related issues”. No further details about the disclosure issues were available, and the pension was not available for comment.

Brazos and AlpInvest did not return calls for comment.

SDCERA is looking to concentrate on a smaller number of “key relationships for larger investment amounts each”. Also, San Diego County is reducing its exposure to the US mid-market buyouts to concentrate on other strategies including distressed investments for control and international mid-market funds.

The pension, which has invested in private equity since the early 1990s, expects to sever several private equity relationships over the next few years, according to documents from its most recent investment committee meeting.

SDCERA’s private equity portfolio is valued at about $346 million.