Oregon commits $200m to GIP’s infra debt fund

The Oregon Public Employees Retirement Fund (OPERF) has committed $200 million to Global Infrastructure Partners’ (GIP) debut infrastructure debt fund, following the recommendation of the Oregon Investment Council (OIC), which manages the fund, and pension consultant TorreyCove Capital Partners.

Infrastructure Investor reported at the end of June that GIP was looking to raise $2.5 billion for its first infrastructure debt fund, which will invest in energy, transportation and water/wastewater, and is expected to hold a first close in September.

According to OIC meeting materials, the GIP Capital Solutions Fund (GIP CAPS) will focus on OECD countries but may invest up to 10 percent of the fund in non-OECD countries. GIP is looking to make 20 to 25 investments ranging in size from $50 million to $250 million and is targeting a net internal rate of return (IRR) of 9 percent to 11 percent, including a cash yield of 5 percent to 7 percent.

OIC investment staff based their recommendation in part on GIP’s management expertise, the flexibility the fund offers by investing in a variety of transaction structures, and the chance to diversify OPERF’s alternative assets portfolio.

GIP CAPS will be managed by an investment team led by Steve Cheng and Reiner Boehning, debt specialists and investment principals at GIP. Both were previously co-heads of global project finance at Credit Suisse.

OPERF has made a commitment to a GIP fund before. In 2011, the Oregon pension fund committed $150 million to GIP II, one of two infrastructure equity funds the firm has raised. GIP II closed in 2012 on $8.25 billion, making it the largest infrastructure fund ever raised. GIP’s first fund closed on $5.64 billion in May 2008.

“With the Fund, GIP aims to deliver returns that are largely uncorrelated with other asset classes, providing an important level of diversification relative to other OPERF assets,” according to the OIC’s materials.

OPERF’s target allocation to infrastructure within its alternatives portfolio ranges from 25 to 35 percent or approximately $1.7 billion to $2.4 billion based on the current net asset value of the pension fund’s overall portfolio, which at the end of June totalled $70.8 billion.

“To date, OIC has approved $950 million in aggregate commitments to this sector, and Staff considers GIP CAPS a complementary strategy as part of the OPERF infrastructure portfolio,” OIC wrote in the meeting materials presented at a recent board meeting.

“Moreover, GIP is a focused investor with expertise across the spectrum of infrastructure investments and a deep network of industry relationships,” OIC said.

Headquartered in New York, GIP currently has approximately $18.7 billion in assets under management. The firm also has offices in London, an affiliate office in Sydney and a portfolio company operations headquarters in Stamford, Connecticut.

OPERF is part of the Oregon Public Employees Retirement System (OPERS), the vehicle through which public employers provide retirement benefits to Oregon's public employees. With 800 public employers participating, OPERS covers 95 percent of all state and local government employees in the state.

OPERS is directed by its own independent board and administered by its own agency based in Tigard, Oregon. Its contributions go into the Oregon Public Employees Retirement Fund, which pays OPERS members their benefits.

OPERF in turn is managed by the Oregon State Treasury under the direction of the Oregon Investment Council, which invests all State of Oregon funds, including OPERF and the State Accident Insurance Fund.