The California State Teachers’ Retirement System recently committed $100 million to the fourth iteration of the Banc of America Merrill Lynch Capital Access Fund, even though the returns of the three predecessor funds are all in negative territory.
CalSTRS, as the pension fund is known, previously committed to the earlier three funds as well. The limited partner can choose to increase its recent commitment to $200 million within four years.
The IRRs for the three previous funds, as of March 31, 2009, are –14.7 percent for the 2003-vintage fund; –5.5 percent for the 2005 fund; and –28.6 percent for the 2006 fund, spokesperson Ricardo Duran told Buyouts. “As an investor in the long term, CalSTRS believes there is underlying value in these investments that will emerge over time and as the economy recovers,” said Duran. BAML Capital Access Funds declined to comment.
The investment is part of CalSTRS’s $1.135 billion “proactive portfolio,” which includes an urban and rural component and an emerging manager program, among other strategies. Chicago-based BAML Capital sponsors funds of funds focused on underserved U.S. markets, committing to venture, growth, mezzanine and buyout vehicles. The firm invests in emerging managers; funds that focus on companies owned or operated by women or ethnic minorities; companies located in low to moderate income or rural areas; and those focused on underserved consumer markets.
The firm has previously committed to funds run by Acon Bastion Partners; Belvedere Capital Partners; ICV Capital Partners; Marwit Capital; Nogales Investors; Palladium Equity Partners; RLJ Equity Partners; and Yucaipa Corporate Initiatives, among others.
“This fund extends new capital into traditionally underserved communities in the inner cities and rural areas, during a time when the capital that small businesses need in order to grow is in short supply,” said CIO Christopher Ailman in a prepared statement. “These opportunities, we believe, will yield long-term value that will benefit the retirement fund and add to the financial security of our members,” he added.