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LPs continue to invest in private equity despite challenging economic conditions.

by Louise Weller

  • 02 Dec 2011
  • PE

Despite the widespread and continuous volatility in the financial markets, a number of LPs have made new commitments to the private equity asset class over recent months. Washington State Investment Board formed a new relationship with emerging markets specialist Actis, committing USD 250 million to its latest fund, Actis Emerging Markets 4. The fund is targeting USD 3.5 billion to focus on opportunities in China, India, Africa and Latin America. The US-public pension fund also re-upped with Apax Partners by committing EUR 222 million to its most recent European-focused buyout fund, Apax Europe VIII. The pension fund currently has around USD 15.6 billion allocated to private equity and has committed more than USD 2 billion to the asset class over the course of 2011.

Another US public pension fund that has made a number of sizeable commitments so far this year is Texas County & District Retirement System, which has committed more than USD 340 million to private equity funds over the course of 2011. Significant commitments have included USD 50 million to OCM European Principal Opportunities Fund III, a special situations fund targeting USD 3 billion, USD 20 million to HIG Growth Buyouts & Equity Fund II, as well as USD 40 million to mezzanine fund, Summit Partners Credit Advisors. The pension fund currently has total assets under management of USD 17.7 billion, with 5% currently allocated to private equity. In March, it took the decision to increase its target allocation to the asset class from 8% of total assets to 10%.

Furthermore, New Mexico State Investment Council has also recently made a commitment to Natural Gas Partners X, committing up to USD 75 million to the latest offering from NGP Energy Capital Management, which is targeting USD 4 billion for opportunities in oil and gas industries. The fund held a second close in July on USD 871 million. It previously committed USD 30 million to NGP Energy Technology Partners II. New Mexico State Investment Council currently has total assets under management of USD 14 billion, with a target allocation to the asset class of 10% of total assets.

Despite the economic uncertainties, LPs have continued invest in the private equity asset class over the course of 2011. Preqin tracks over 1700 LPs that are based in North America, that are currently actively investing in private equity, or are considering making a maiden commitment to the asset class. Public pension funds within this region continue to remain key investors in the asset class, representing 15% of the North America LPs tracked by Preqin. North American public pension funds have increase their target allocations to private equity over recent years to currently have an average target allocation of 7.7% of total assets, compared to 5.4% in 2008.

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