LPs

Michigan goes big: $1.5 bln to private markets in Q4

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Michigan State Investment Board, private equity, pension fund
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  • Michigan committed $775 mln to PE
  • New pledges to energy and life sciences co-invest vehicles
  • $69.5 billion system has 18 pct allocation to PE

State of Michigan Investment Board committed $1.5 billion to private-markets investments in Q4, including $300 million to TPG Sixth Street Partners’ credit fund for late-stage growth companies.

The board, which manages $69.5 billion in retirement-fund assets, has an 18 percent allocation to PE and an 11.5 percent allocation to real return and opportunistic investments, which include private credit and infrastructure.

New commitments include:

  • $300 million to TPG Sixth Street’s TSSP Capital Solutions, targeting $2 billion and providing structured credit and equity financing solutions to late-stage growth companies;
  • $150 million to TSG 8 LP, a branded consumer products buyout fund with a $3.5 billion target and a $4 billion cap;
  • $150 million to Warburg Pincus Global Growth LP, a multistrategy global growth fund with a $13.75 billion target;
  • $125 million to KKR European Fund V SCSp, a Western Europe-focused buyout fund;
  • $100 million to Greenspring Associates’ Greenspring Master G LP, a venture-focused separately managed account;
  • $100 million to Flagship Pioneering Special Opportunities Fund II LP, a life sciences VC fund;
  • $75 million to FS Equity Partners VIII LP, a consumer and distribution-focused middle-market buyout fund;
  • $25 million to Greenspring Micro II LP, a micro-VC fund of funds;
  • $20 million to 5AM Ventures VI LP, a $350 million early-stage life sciences VC fund; and
  • $30 million to 5AM Opportunities I, a co-investment fund that will make additional investments in late-stage life sciences companies within 5AM’s venture portfolio.

Michigan increased its PE allocation to 18 percent at the end of 2018 from 15.2 percent a year earlier, with a portfolio valued at $12.5 billion.

Over the next 12 months, the state investment board plans to continue to tilt its portfolio slightly toward the middle and lower-middle market, to diversify its current exposure to large funds.

It will also seek more co-investments, to both average down its private equity costs and target specific investments with attractive risk/return characteristics.

The TPG Sixth Street fund was included in Michigan’s $8 billion real return and opportunistic portfolio, which aims to provide an inflation hedge and make space for attractive opportunities that may not fit in another plan portfolio.

The state plans to pursue private energy opportunities, opportunistic credit and niche strategies with some scalability and contractual cash flow within the portfolio in the coming year.

Michigan also made new commitments in real estate and infrastructure, committing $200 million to Blackstone Real Estate Partners IX, $200 million to Lone Star Fund XI and $35 million to co-invest with Kayne Anderson in Flywheel Energy, a owner and operator of natural gas assets and midstream systems in the U.S.

Michigan has the 18th-largest defined benefit public pension in the U.S., with pension plan assets of $60.8 billion and an additional $8.7 billion in a fund to cover other post-employment benefits.

Action Item: More about Michigan’s recent investment activity: https://bit.ly/2EXJ5tCÂ