Retirement Fund: New York City Public Pension Funds
Assets Managed: $137 billion
Private Equity Consultants: StepStone, Hamilton Lane
PE Assets Managed: $8.3 billion
PE Allocation/Target: 6% as of April 30, target 7%
Total PE Exposure: $15.5 billion
Chief Investment Officer: Larry Schloss
During the latter half of its fiscal year ended June 30, New York City committed $500 million each to new flagship funds from New York’s Apollo and London-based CVC as it continues its multi-year relationships with the two sponsors. The commitments eclipsed the size of the retirement system’s $425 million pledge last year to Warburg Pincus Private Equity XI.
“It’s consistent with our policy … to have larger commitments to fewer managers that are top-quartile,” said Larry Schloss, chief investment officer of the pension system that includes retirement funds for city teachers, employees, police and firefighters. “These are proven managers for us.”
The pension fund also made first-time commitments to four lower-middle-market and mid-market buyout funds sponsored by emerging managers. Specifically, New York City committed $25 million each to Incline Equity Partners III and Altaris Health Partners II, $20 million to Capital Partners Private Equity Income Fund II and $15 million to Grey Mountain Partners Fund III.
Also recently New York City pledged $225 million to Olympus Growth Fund VI, managed by Stamford, Connecticut-based Olympus Partners, which specializes in North American buyouts and growth equity. The commitment to the fund came as part of a move away from venture capital investing and toward growth equity, Schloss said.
Apollo Investment Fund VIII, the firm’s marquee buyout vehicle, has a target of $12 billion and a hard cap of $15 billion. Apollo’s previous fund closed at nearly $15 billion in 2008. New York City’s commitment comes after it generated solid returns on older investments with Apollo.
Teachers’ Retirement System of the City of New York reported an IRR of 23.2 percent as of Sept. 30 on its $50 million commitment to Apollo Investment Fund VII in 2008. The pension fund’s $35 million commitment to the 2006 vintage Apollo Investment Fund VI earned an IRR of 7.6 percent.
CVC Capital Partners VI is CVC’s namesake European and North American buyout fund that closed on July 19 with $16 billion in commitments. New York City Fire Department Pension Fund reported an 8.2 percent IRR on its $13.5 million commitment to CVC European Equity Partners V LP in 2008 and a 41.2 percent IRR on its $10 million commitment to CVC European Equity Partners III in 2001.
The emerging manager commitments mark the latest moves by the pension system’s in-house team headed up by Alex Done, executive director private equity/emerging managers. The pension fund had until last year been tackling its emerging manager investments through four fund-of-funds manager.
Pittsburgh-based Incline Equity typically makes $10 million to $25 million investments in light manufacturing, distribution, and business and industrial services, according to its website. Altaris Capital Partners, a New York-based sponsor with $775 million under management, focuses on healthcare.
Greenwich, Connecticut-based Capital Partners invests in or buys firms with consistent free cash flow in any of seven sectors including manufacturing, distribution, business services and education. Boulder, Colorado-based Grey Mountain Partners said July 11 it closed its Fund III with $425 million. It is a lower-middle-market buyout fund targeting North American companies.