Slideshow: Top-Performing PE/VC Funds Of 3 Big-Apple Pensions

The roughly decade-old private equity programs of three New York City pension funds are off to reasonably strong starts. But a major slowdown in commitment pace in the wake of the financial crisis will have implications for returns in the years ahead.

The largest of the three, the $42.7 billion Teachers’ Retirement System of the City of New York, has generated an IRR of 8.8 percent since inception and a total value multiple of 1.2x on its $2.0 billion private equity portfolio as of March 31, according to a report prepared for the pension fund’s trustees by adviser Hamilton Lane.

As of the same date the second largest, the $24.6 billion New York City Police Pension Fund, had produced an IRR of 10.2 percent and a total value multiple of 1.3x on its $1.6 billion portfolio. And the third largest, the $8.0 billion New York City Fire Department Pension Fund, had produced an IRR of 10.9 percent and a total value multiple of 1.3x on its $476 million portfolio. The figures for the latter two pensions come from adviser PCG Asset Management.

All three pension funds, along with two others, are under the direction of the New York City Office of the Comptroller. (New York City Employees’ Retirement System also has a significant private equity program, but we don’t have updated results.) Its chief investment officer for about the last year and half has been Larry Schloss, who surely has to be counted a friend of the asset class as the co-founder of buyout shop Diamond Castle, and before that the head of DLJ’s merchant banking division.

The portfolios share much in common, not surprising since they fall under common management. As of March 31, New York City Teachers’ held interests in 125 funds managed by 85 different firms. Funds devoted to corporate finance and buyouts represent nearly three-quarters of money invested, followed by venture capital (11 percent) and special situations (7 percent). The first draw-down dates to mid-1999 and 4.4 years was the average age of active commitments.

New York City Police held interests in 138 funds, by our count, as of the end of March, and it appears to be buyout-heavy like that of New York City Teachers’. The first draw-down took place in late 1998. New York City Fire held interests in 115 funds managed by 77 different firms, largely pursuing buyout/corporate finance strategies, as of the end of March. Like New York City Police, the first drawdown dates to late 1998 and five years was the weighted average age of commitments.

Interestingly, the three pension funds ramped up their commitment pace rapidly in the mid-2000s, followed by a dramatic drop-off in the last few years as they progressed toward their target allocations (see infographic at right). Together the three committed $249.5 million to eight funds that had their first drawdown in 1999. By 2006 comparable figures had climbed to $1.2 billion to 68 funds; and by 2008, the peak, the three pensions committed $2.1 billion to 98 funds that had their first drawdowns that year. But then a huge deceleration that saw the three commit just $115 million to five funds that first drew capital last year. By press time we weren’t able to get an explanation for this drop-off from the NYC Comptroller’s office, although a spokesperson noted that both the new comptroller and Larry Schloss started their new jobs in January 2010.

This year the pace has picked up again as at least two of the pensions gained some wiggle room on their target allocations. New York City Teachers’ saw a target allocation boost from 4 percent to 6 percent in the second quarter, for example; its private equity portfolio as of the end of March accounted for 4.6 percent of plan assets. The same quarter New York Fire won approval for an increase in target allocation from 5 percent to 7 percent, translating into a pace of $100 million to $150 million per year over the next four years. Its actual allocation as of March 31 was 6.0 percent.

Click through below to see the top 10-performing funds in the combined portfolio of the three New York City pension funds. All data comes from the New York City Office of the Comptroller.

David M. Toll is editor-in-charge of Buyouts Magazine. Follow him on Twitter @davidmtoll. Follow @Buyouts.

[slideshow]

[slide title=”No. 10 – Apollo Investment Fund VII LP”]

IRR: 26.4%

Multiple: 1.52x (one fund has it at 1.34x)

Year of first draw-down: 2008

Pensions In Fund: NYC Police, NYC Fire, Teachers’ Retirement of NYC

Combined Capital Committed: $125.0 million

[slide title=”No. 9- Vista Equity Partners Fund III”]

IRR: 29.3%

Multiple: 1.85x

Year of first draw-down: 2007

Pensions In Fund: NYC Police, NYC Fire, Teachers’ Retirement of NYC

Combined Capital Committed: $52.5 million

[slide title=”No. 8 – Landmark Equity Partners XIV”]

IRR:30.1%

Multiple: 1.39x

Year of first draw-down: 2008

Pensions In Fund: NYC Police, NYC Fire

Combined Capital Committed: $40.9 million

[slide title=”No. 7 – Ares Corporate Opportunities Fund III”]

IRR:31.6%

Multiple: 1.65x (one fund has it at 1.54x)

Year of first draw-down: 2008

Pensions In Fund: NYC Police, NYC Fire, Teachers’ Retirement of NYC

Combined Capital Committed: $95 million

[slide title=”No. 6 – FirstMark IV”]

IRR: 36.9%

Multiple:1.93x

Year of first draw-down: 2005

Pensions In Fund: NYC Police, NYC Fire

Combined Capital Committed: $11.5 million

[slide title=”No. 5 – Apollo Investment Fund V LP”]

IRR:  39.8%

Multiple: 2.66x (one fund has it at 1.99x)

Year of first draw-down: 2001

Pensions In Fund: NYC Police, NYC Fire, Teachers’ Retirement of NYC

Combined Capital Committed: $80 million

[slide title=”No. 4 – Blackstone Capital Partners IV”]

IRR: 40.7% (two funds have it at 39.9%)

Multiple:2.63x (one fund has it at 2.36x)

Year of first draw-down: 2003

Pensions In Fund: NYC Police, NYC Fire, Teachers’ Retirement of NYC

Combined Capital Committed: $95 million

[slide title=”No. 3 – CVC European Equity Partners III”]

IRR: 42.2%

Multiple:2.98x

Year of first draw-down: 2001

Pensions In Fund: NYC Police, NYC Fire

Combined Capital Committed: $35 million

[slide title=”No. 2 – Lincolnshire Equity Fund III LP”]

IRR: 43.2%

Multiple:2.06x

Year of first draw-down: 2004

Pensions In Fund: NYC Police, NYC Fire, Teachers’ Retirement of NYC

Combined Capital Committed: $45 million

[slide title=”No. 1 – Pegasus Partners IV LP”]

IRR: 49.5%

Multiple:2.66x (one fund has it at 2.59)

Year of first draw-down: 2007

Pensions In Fund: NYC Police, NYC Fire, Teachers’ Retirement of NYC

Combined Capital Committed: $42.5 million

[/slideshow]