(May 3, 2013) – Who says US public funds can’t get anything done?
In one morning, the five-member Oregon Investment Council, which manages the state’s $63 billion employee retirement fund, signed off on three new private equity allocations totaling almost $1 billion.
Two of the allocations focus on distressed debt. The council committed $300 million to Apollo Global Management’s new fund (number VIII), which will “target opportunistic buyouts, corporate carve-out transactions, and distressed investments,” according to council documents. This is Oregon’s third investment with Apollo since 2006—a relationship now worth nearly $1 billion to the private equity giant.
With the next investment decision of the day, the council didn’t diversify, but instead doubled down on its last bet. Lone Star Partners, a $33 billion distressed assets specialist, secured $300 million from Oregon for its new fund. According to the investment proposal, Lone Star VIII will “seek to invest in distressed investment in loans and securities, including single family residential, corporate and consumer debt products, as well as financially-oriented and asset-rich operating companies.
The pension fund has an even longer relationship with Lone Star than Apollo: it has invested in every offering since 1995, committing a total of $2.17 billion over the last 18 years.
Finally, the council rounded out its morning with a $250 million allocation to Blackstone’s tactical opportunities program. The managed account will pursue “a highly flexible investment approach” across nearly any asset type, “in order to generate superior risk adjusted returns with a focus on capital protection.”
Blackstone and the New Jersey pension fund created the first such program together in 2011. While it is too soon to tell if the “tac-ops” structure is a robust, profitable one for the long term, Blackstone’s launch of a full program indicates the funds have been a success thus far.
As for distressed debt, a number of CIOs and public pension investors have told aiCIO that the so-called “low hanging fruit” has largely been picked. However, according to Segal Rogerscasey data, $350 billion in corporate loans and bonds will need to be refinanced over the next six years.
Related article: Oregon Trumpets Private Equity Investment