The largest public pension in the US is paving the way toward becoming a major direct investor in infrastructure assets, part of a broader expansion into what its investment committee is calling a new “inflation-linked” asset class.
In July, the investment staff of the $232 billion (€171 billion) Sacramento-based California Public Employees' Retirement System will meet off-site with the pension's board to present proposed details of the new programme. It is the first time in many years that CalPERS has considered allocating to a new asset class.
The pension defines “inflation-linked” assets as including commodities, inflation-liked bonds, timberland and infrastructure. Particularly in infrastructure, CalPERS is planning to flex its considerable muscle. According to a memo from the pension, CalPERS is already invested in infrastructure assets to the tune of “several billion dollars”, albeit as an indirect investor. The investment staff wants to change this approach, and has hired consultant Wilshire Associates to help structure a direct investment programme.
According to the CalPERS memo, the pension “could be going in with other large investors on an alternative energy (ethanol, for example) power plant, and related commodities prices could be locked in through the commodities program. It's a different type of risk and doesn't fit neatly into categories…”
The memo estimates that more than $20 trillion in new capital is needed in the energy market alone. Creating the new asset class “would make CalPERS a player in solving some pressing public policy infrastructure problems related mainly to energy and transportation”, it concludes.
Eventually, as much as one percent of the overall CalPERS portfolio could be in the form of direct infrastructure assets. If these end up outperforming the fee-laden partnerships and accounts in which the bulk of the pension's assets are tied up, it is likely that the direct programme will grow further.
SUN CAPITAL CLOSES $6BN FUND
US private equity firm Sun Capital Partners has closed its sixth fund, Sun Capital Partners V, on $6 billion (€4.5 billion), well surpassing the fund's $4 billion target. The $6 billion fund marks a change in fundraising strategy for the firm, which closed its previous fund on $1.5 billion in 2005. “We realised we couldn't bring a buyout fund to market every two years,” said Richard Hurwitz, Sun's vice president of communications and investor relations, as it was “too disruptive to the deal flow” given the firm's investment pace. “Last year we did 33 acquisitions; the year before, 30….and this year alone we've already acquired 10 platforms,” said Hurwitz.
LEONARD GREEN CLOSES ON $5.3BN
Los Angeles-based private investment firm Leonard Green & Partners has closed its fifth private equity fund, Green Equity Investors V, at $5.3 billion (€4 billion). The firm plans to continue its strategy of investing in North American middle-market companies in the retail, consumer products, distribution, media, business services and healthcare sectors. Limited partners include US and international public and corporate pension funds, funds of funds, endowments, private foundations, banks, insurance companies and family offices, the firm said in a statement. Leonard Green's previous fund, Green Equity Investors IV, closed on $1.85 billion in January 2003.
TCW TEAMS UP TO RAISE $444M FUND
US investor TCW has teamed up with global reinsurer Swiss Re and advisory firm Conning & Company to raise a €329.2 million ($444.3 million) fund for investments in the clean energy sector. The fund will provide mezzanine and equity capital for environmentallyfriendly energy initiatives, including wind, solar, and hydroelectric projects, with stable cash flows and returns. It will also look at ways to generate carbon credits and acquire tradeable renewable energy certificates. The fund has been awarded a mandate by the United Nations Economic Commission for Europe to participate in special project financing initiatives, and it will also receive UN grant money for Kyoto and climate change related projects.
AUDA CLOSES 12TH FUND OF FUNDS
New York-based Auda Private Equity, a subsidiary of hedge fund and private equity investor Auda Advisor Associates, has closed its 12th fund, Auda Capital IV, on $787 million (€589 million). It is the firm's first fund that includes both fund of funds and co-investment components. Essentially, Auda Capital IV consists of “two funds—there's the US-focused buyout fund and also the co-investment fund”, said Donald Rigoni, Auda Private Equity's senior vice president. Approximately $402 million was raised for the buyoutfocused fund, which will invest in 15 to 20 middle market fund managers, he said. An additional $385 million was raised that will be used to make 20 to 30 co-investments in buyouts and growth equity financings alongside fund managers with whom Auda invests. Auda Capital IV's limited partners include institutional investors and high-net worth individuals from the US, Europe and the Middle East.
DRAPER FISHER JURVETSON RAISES $435M OF $600M FUND
Menlo Park, California-based Draper Fisher Jurvetson has raised $435 million (€327 million) for its ninth fund, according to a Securities and Exchange Commission filing. The venture capital firm intends to close the fund on $600 million, reported industry website VentureBeat. Draper Fisher Jurvetson focuses on investments in the wireless, internet, new media, bioinformatics, nanotech, and cleantech industries. One of its most famous portfolio companies, later acquired by Microsoft, is web-based email provider Hotmail. Many of the 300 firms the VC firm has backed include household names, such as VOIP pioneer Skype, later acquired by eBay, and online directory company Four11, acquired by Yahoo. Draper Fisher Jurvetson manages more than $4.5 billion in capital.
HELLMAN & FRIEDMAN CLOSES $8.4BN FUND
Hellman & Friedman has closed Hellman & Friedman Capital Partners VI on $8.4 billion (€6.2 billion). The fund was invested in by many of the firm's longstanding limited partners, such as the California Public Employees' Retirement System, noted chairman Warren Hellman in a statement. HFCP VI will employ the same investment strategy as Hellman & Friedman's previous five funds, making investments of $250 million to $1 billion primarily in the US and European markets. HFCP VI's first investment, its pending $1.8 billion acquisition of human capital management firm Kronos, was also invested in by San Diego-based JMI Capital.