New Jersey forms new separate account

New Jersey will grant TPG Capital a broad mandate to invest in ‘idiosyncratic’ strategies. 

The New Jersey State Investment Council (SIC) supported the formation of a new separate account managed by TPG Capital at its meeting on Monday, acting director Chris McDonough told Private Debt Investor. The $76.7 billion retirement system’s commitment to the separate account remains subject to legal review.

The SIC's new account will combine two existing TPG-managed mandates into one entity. New Jersey committed $100 million to each of those mandates, Knight/TPG NPL-Residential and Knight/TPG NPL-Commercial, in March 2012. The residential and commercial non-performing loan accounts had netted internal rates of return of 28 percent and 27 percent through June, respectively, according to an investment report. 

In addition to merging the NPL mandates, New Jersey will increase its commitment to the newly formed vehicle by $200 million.

New Jersey’s new account grants TPG a broad mandate to for investments in “idiosyncratic” strategies and assets, including distressed asset sales from commercial banks, medical royalties, re-performing real estate loans and mortgage servicing rights, according to an investment memo from McDonough included in SIC meeting materials.

Under the proposed terms, TPG will charge New Jersey with a 1 percent management fee on invested capital. TPG will collect a 15 percent incentive fee over a 6 percent hurdle on the vehicle, according to an investment report. 

New Jersey's commitment to the TPG account is similar to one made by the Oregon Investment Council earlier this year. In January, Oregon committed $250 million to TPG’s Special Situations Partners Adjacent Opportunities fund, which provides TPG’s special situations group with flexible capital to invest in deals that are inconsistent with strategies traditionally pursued by its Opportunities Partners and Specialty Lending funds, according to a TorreyCove Capital Partners memo.

Those strategies would consume approximately 50 percent of the fund’s investment capital and include medical royalties, residential and commercial real estate, infrastructure special situations and structured European whole loans, according to Oregon documents. The remainder of the vehicle would be co-invested alongside TPG’s Opportunities Partners and Specialty Lending funds or in other opportunities sourced from the TPG platform. 

In addition to its commitment to the new separate account, New Jersey also cleared the way for a commitment of up to $100 million to TPG's latest opportunities fund, which is targeting $2.6 billion with a $3 billion hard-cap.

TPG projects Opportunities Partners III to deploy between 35-45 percent of its capital in asset special situations, 30 percent to corporate dislocations and 25-35 percent to corporate distressed-for-control investments, according to presentation materials available through the New Mexico State Investment Council website. That fund is scheduled to hold a final close later this month, according to New Mexico.

Outside of its pending commitments to TPG, New Jersey SIC also supported a €125 million commitment to AnaCap Financial Partners III, $100 million to TCV VIII and $100 million each to MKP Opportunity Fund, BlueCrest International, Brevan Howard Master Fund, Claren Road Credit Master Fund, Scopia PX.