Connecticut considers $125 mln to Apollo VIII

Connecticut’s state Treasurer Denise Nappier is considering making a commitment of $125 million to Apollo Global Management’s eighth fund.

Fund VIII had been targeting $12 billion, though it has already raised that amount, according to the firm’s third quarter earnings statement. The fund’s hard cap is $15 billion.

Nappier presented the investment opportunity at the state Treasury’s Investment Advisory Council meeting earlier this week. As principal fiduciary of the Connecticut Retirement Plans and Trust Funds, Nappier has final approval over investment decisions following feedback from the advisory council and due diligence from investment staff and consultant Franklin Park. Nappier has not yet made a final decision about the Apollo commitment.

According to pension documents, Apollo’s prior flagship fund, Fund VII, which raised about $15 billion in 2008, was generating a 37 percent gross internal rate of return and a 28 percent net IRR on $11.1 billion of net committed capital as of June 30, 2013.

Nappier also reported to the Investment Advisory Council approval of two re-ups (contingent on successful contract negotiations): up to $75 million to Yucaipa American Alliance Fund III, which is targeting $1.6 billion. Yucaipa III will focus primarily on middle-market investments in the buyouts of logistics, distribution, grocery, food, retail and hospitality companies, according to pension documents. Connecticut committed $75 million to Yucaipa American Alliance Fund II in 2008. That fund, as of December 31, 2012, was generating a 19.9 percent net IRR and a 1.5x multiple of invested capital, the documents said.

And the state committed up to $50 million to Altaris Health Partners III, which is targeting $425 million for healthcare-related investments, primarily in the U.S. and secondarily in Europe, the documents said. Connecticut committed $40 million to each of two prior funds – AIG Altaris Health Partners I in 2004 and Altaris Health Partners II in 2007, the documents said.

Fund I, as of March 31, 2013, was producing a 13.8 percent net IRR and Fund II, as of the same date, was generating a 21.9 percent net IRR, according to the documents.

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