Alameda County mulls new relationships as it builds PE exposure

  • Alameda building PE portfolio with new relationships
  • Backed CapVest IV, mulls backing Audax VI
  • PE target allocation 9 pct, actual 5.7 pct

Alameda County Employees’ Retirement Association is mulling two commitments to new PE relationships as it steadily builds exposure to the asset class.

The $8.1 billion pension system is considering pledging $34 million to Audax Private Equity’s sixth fund, its first commitment to Audax, its investment-committee meeting agenda for Aug. 8 shows.

Earlier this year, the system committed $34 million to CapVest Equity Partners’s fourth fund, targeting $1 billion, another new relationship for the system.

With this, the pension system’s private equity commitments in 2018 to date total $122 million, in re-ups and new relationships.

So far this year, the pension system has re-upped $10 million to Khosla Ventures’ sixth and Seed D funds. Khosla Ventures is targeting $1 billion for its sixth fund and $400 million for its Seed D fund, SEC documents show.

ACERA also committed $44 million to Sycamore Partners’ third fund, which closed at $4.75 billion in July 2018.

Last year, the system made four new PE commitments totaling $152.8 million, documents said. Of these, Bernhard Capital Partners, which focuses on middle-market industrial-services companies, was a new relationship.

Alameda’s $463.6 million private equity portfolio includes venture capital, corporate buyouts, debt-related and special situations. Actual PE allocation was 5.7 percent against a target of 9 percent, as of March 31, 2018, documents said.

Alameda’s PE portfolio was invested across 41 funds and 19 managers in buyouts, venture and debt-related/special situations asset classes, as on Dec. 31, 2017, documents said.

Investment firm Verus Advisory advises Alameda County and recommended that the fund needed to make more than $400 million in additional PE commitments to achieve the target allocation of 9 percent by 2022, documents said.

Alameda’s PE portfolio returned 14.1 percent for the one-year period ended Dec. 31, 2017, documents said.

The private equity portfolio has produced a net 15.3 percent internal rate of return since its inception in 2008, including all inactive funds, documents show.

Total PE commitments (active and inactive) aggregated $1 billion, or 12.4 percent of its class target as of Dec. 31, 2017.

Last year, investment staff at the Alameda pension system sought to separate the PE portfolio from the alternatives portfolio, which also included absolute-return strategies and other non-traditional and uncorrelated investments. It also changed its benchmark to Thomson Reuters from the Russell 3000.

The pension fund also has an emerging manager’s fund-of-funds policy across all asset classes that is handled by Bivium Capital Partners.

Action Item: Contact Betsy Tse, chief investment officer, at