Pennsylvania pension commits $150m

The $34bn Pennsylvania State Employees’ Retirement System commits to six private equity debt and technology funds, as it reveals investments are down 4 percent in the first quarter of 2008.

Pennsylvania State Employees’ Retirement System has committed almost $150 million (€97 million) to six private equity funds targeting debt and technology investments.

The $34 billion fund committed €25 million ($38.6 million) to Avenue Capital Group’s European debt fund, Avenue Europe Special Situations Fund. The fund, which is targeting €1.5 billion according to documents released by neighbouring pension fund, Pennsylvania Public School Employees' Retirement System, and will focus on senior secured debt and unsecured debt.

A board meeting of Pennsylvania State Employees’ Retirement System (SERS) also approved commitments of $30 million to Dover Street VII, $30 million to HIG Bayside Debt and LBO Fund II, $25 million to Great Hill Equity Partners IV, $15 million to Vista Equity Partners Fund III and $10 million to Guggenheim Technology Ventures I.

Bayside’s distressed debt affiliate of HIG Capital has reportedly raised $3 billion for its second fund, after originally targeting $2 billion. Its debut vehicle in 2004 raised $500 million. Great Hill Partners closed its previous fund, Great Hill Equity Partners III, on $750 million in 2006, while Vista Equity Partners have already invested part of its third fund, completing a buyout of the Cyborg business unit from Hewitt Associates in January. The company was later renamed Accero.

Today’s commitments come as SERS also released its 2007 actuarial valuation report stating that the fund was down 4.1 percent in the first quarter of 2008. The fund’s chief investment officer John Winchester said in a statement gains in April and May were expected to offset the first quarter however it compared markedly to investment gains over the past five years.

“After a five-year period in which SERS’ investment earnings averaged 17.5 percent per year, 2008 is shaping up as a very different investment environment,” he said.

SERS chairman Nicholas Maiale said the credit dislocation was challenging every institutional investor but he added: “We are long-term investors and recognise that there will be periods in which broad trends in the investment markets make it impossible to meet our goals every quarter, or every year.

“We remain confident, however, that our broadly diversified portfolio will enable us to continue meeting our long-term goals.”