LP corner, week of Aug. 31, 2009

New York Common pledges to mezz fund, emerging manager

The $116.5 billion New York State Common Retirement Fund announced pledges last month to a mezzanine fund and to an emerging manager that invests in community banks.

The limited partner re-upped with Falcon Investment Advisors with a $50 million pledge to Falcon Strategic Partners III. Falcon Investment seeks to raise $800 million to make mezzanine investments in the lower middle market, providing slugs of $10 million to $75 million of capital per deal.

Other limited partners in the fund include the Florida State Board of Administration, the New Mexico State Investment Council, the Teachers’ Retirement System of Louisiana and the Los Angeles City Employees’ Retirement System, which committed $10 million.

Falcon Investment, which was founded in 2000, has offices in Boston and New York.

New York Common also spread some money on the West Coast. Irvine, Calif.-based Carpenter & Co. raised a $30 million commitment, via the NYSCRF Pioneer Partnership Fund B, for its debut vehicle Carpenter Community BancFund.

Carpenter is seeking $200 million for the fund, with a hard cap of $300 million, to invest in 12 to 15 community banks. The aim of the fund is to support new and old community banks nationwide, although the firm expects to invest half of its fund in California.

New York State Common Retirement Fund’s emerging manager private equity program targets funds of less than $750 million, as well as those owned by women and minority managers. The target allocation for the alternative asset class for the New York State Common Retirement fund is 8 percent. As of March 31, its allocation stood at 9.8 percent. —Nancy Gordon

Pathway Capital wraps up FoF above $600M

Pathway Capital Management has closed its latest fund of funds, reeling in a little more than $600 million.

The Irvine, Calif.-based firm, which has more than $23 billion in assets under management, held a final close for Pathway Private Equity Fund 2008 in mid-July. The initial target for the fund was $500 million.

The 2008 fund is the fifth annual co-mingled fund raised by Pathway Capital. Limited partners include the Marin County Employees Retirement Association and the pension funds of publicly listed companies Caterpillar Inc. and PPL Services Inc. The LP base is entirely institutional, comprised of corporate and public pension funds, says a source familiar with the fund.

Pathway Capital manages 34 funds with an average size of $300 million, according to its website. The firm also manages funds for institutional investors, including the Alaska Permanent Fund Corp. and the Nevada Public Employees Retirement System.

Pathway Capital, which was founded in 1991, also has offices in Rhode Island and London, as well as a strategic alliance with Tokio Marine Asset Management Co. Ltd. that gives it a presence in Tokyo. —Michael Baron

Tennessee dips into PE activity

Earlier this month, the Tennessee Consolidated Retirement System made its first-ever dip into private equity waters, committing $150 million to funds managed by Hellman & Friedman, Khosla Ventures and TA Associates. The investments come about a year after the Tennessee legislature voted to approve alternative asset commitments, making Tennessee the 49th state with such flexibility.

The only state that doesn’t make alternative investments out of either its public employees’ pension system or its state treasury is Georgia.

Representatives from the state did not return calls for comment.

But Georgia officials may want to consider a Bloomberg report last week that said that alternative investments had hamstrung public pension systems in such states as Oregon and Washington, due to outsized mega-fund commitments and disappearing distributions. However, the story also pointed out that, over time, PE return benchmarks almost always beat public equities indices. For example, the Washington State Investment Board told Bloomberg that its buyout portfolio produced an 8.2% average annual gain over the past decade, compared to a 3.9% drop in the S&P 500 Index. —Dan Primack