US Public Pension Funds Continue to Target Large to Mega-Buyout Funds – June 2013

by Joanna Nye

  • 25 Jun 2013
  • PE

Of all private equity buyout funds in market, large to mega-buyout funds are the scarcest, with just 13% of buyout funds currently raising falling into this category. However, it appears that LPs continue to have an appetite for investing in these funds; in particular, US-based public pension funds have been making sizeable commitments to these vehicles in the last couple of weeks.

California Public Employees' Retirement System (CalPERS) has recently made commitments to two large to mega-buyout funds, $400mn to Silver Lake Partners IV (targeting $10.3bn in total commitments), and €75mn to Triton Fund IV (targeting $3.3bn in total commitments). Similarly, Los Angeles County Employees' Retirement Association (LACERA) has recently approved commitments of $197mn to CVC European Equity Partners VI (targeting €9bn in total commitments) and $150mn to Carlyle Partners VI (targeting $10bn in total commitments). Virginia Retirement System has also been targeting large-cap buyout funds, having just made a commitment of $275mn to Olympus Growth Fund VI, which is targeting $2.5bn in total commitments, and San Diego County Employees Retirement Association has just committed $90mn to New Mountain Partners IV (targeting $3bn in total commitments).

Preqin's Investor Intelligence currently tracks 5,117 active investors in private equity funds, 5.8% of which are US-based public pension funds. Of these, over half (56.6%) have an appetite for investing in buyout funds, and over a third (39.1%) have previously made a commitment to a large to mega-buyout fund. Fifty-one percent of US-based public pension funds tracked by Preqin anticipate making new fund commitments over the next 12 months, 51% of which will be looking to target buyout funds during this period.

US public pension funds maintain an appetite for buyout vehicles, with this being the most common fund type that the investor type plans to target over the next 12 months. Other fund types that US-based public pension funds are looking to target over the coming year include distressed debt (42%), funds of funds (39%), venture capital (38%) natural resources vehicles (21%).

Although large to mega-buyout funds are less commonly seen on the road compared to buyout funds with smaller target sizes, it can be seen that these vehicles continue to draw interest from LPs, particularly US-based public pension funds, which continue to make substantial commitments. This looks likely to continue going forward, as the majority of US pension funds looking to make private equity fund commitments over the next 12 months maintain an appetite for targeting buyout funds.

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