The Massachusetts Pension Reserves Investment Management Board has approved a list of five private equity firms with which the system can co-invest, according to board meeting materials for MassPRIM’s meeting earlier this month.
The approved firms are Advent International, Blackstone Group, CVC Capital, Onex Partners and Thomas H. Lee Partners, according to the board materials. The board approved the list at the Dec. 2 meeting.
MassPRIM’s policy around co-investing, which calls for the firm to only co-invest with approved firms, should not exceed 10 percent of total private equity annual commitments. It also can’t be more than $30 million in any one deal and can only include deals in North America and Western Europe.
MassPRIM can’t co-invest in venture capital deals and may not invest in deals with more than 10x leverage ratio (debt to EBITDA) without additional approval from the system’s investment committee, according to the board meeting materials.
Also, the system can only invest in majority-owned companies in which MassPRIM and the GP represent more than 50 percent of outstanding equity; the GP must have at least one board seat and the system has to deem the strategy as appropriate for the GP.
The system announced its intentions to launch a co-investment program earlier this year when it laid out its plan for private equity. The system approved $1.4 billion for 2014 and as of October, had committed about $1.1 billion, leaving room for another $281 million by year end.
That remaining balance was likely taken up by two commitments the board approved at the December meeting: $175 million to American Securities Partners VII, LP, targeting $4 billion; and $125 million to H.I.G. Bayside Loan Opportunity Fund IV LP., targeting $1 billion.
Private equity at MassPRIM is led by Michael Bailey, who joined in 2013. MassPRIM hired Michael McGirr and Erin McCafferty to work on the private equity team earlier this year.
Co-investing has become a major factor in many limited partners’ private equity programs. According to Coller Capital’s Winter 2014-2015 Global Private Equity Barometer, 45 percent of the 114 LP respondents have less than a tenth of their private equity exposure in direct investments, including co-investments. Only one in five LPs will still be in that position in five years, according to the survey.
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