http://www.businessweek.com/news/2012-07-19/...p-as-fundraising-looms TPG Said to Seek Oregon Partnership as Fundraising LoomsTPG Capital, trailing rivals that struck partnerships with large U.S. public pension funds, is seeking to secure its own big-ticket investor, according to two people with knowledge of the matter. For the past year, TPG co-founder Jim Coulter has been meeting with officials from pensions to win a large backer for a separate account, said one of the people, who asked not to be identified because the talks are private. The firm has talked to the Oregon Investment Council about such a deal, though an agreement isn’t certain, said the people. TPG, which plans to start raising its next buyout fund in 12 to 18 months, is seeking to join other buyout firms in securing more permanent capital from a large backer as buyout funds are shrinking for the first time in the industry’s history. Blackstone Group LP (BX) (BX), Carlyle Group LP, KKR & Co. (KKR) (KKR) and Apollo Global Management LLC (APO) (APO) have all paired up with at least one major U.S. pension, drawing commitments as large as $3 billion. In such deals, investors write big checks and back multiple strategies at one firm in exchange for better terms such as lower fees. “Ideally, it’s a way for firms to get permanent capital, and a lot better than having to raise it all the time,” said Michael Forestner, who helps advise large institutions at New York-based Mercer LLC. “Managers realize that pensions will ask for special terms and fee breaks anyway, why not get something out of it?” Courting PensionsFort Worth, Texas-based TPG would use the money from a future partner to invest in opportunities outside of its existing funds, according to one of the people. TPG, known for investments in companies such as Burger King and J. Crew Group Inc., has about $51.5 billion under management, according to its website. Michael Mueller, the interim chief investment officer at the Oregon pension, declined to comment on whether the pension has discussed a separate account with TPG. The fund is regularly in talks with firms over potential investments, he said. Owen Blicksilver, a spokesman for TPG declined to comment. TPG’s 2008 fund hadn’t produced a profit for investors as of March 31, according to data from the Oregon pension fund. That fund and its 2006 predecessor, whose holdings are valued below cost, are suffering from a 2008 investment in failed lender Washington Mutual Inc. In total, TPG’s funds lost about $1.3 billion when the bank was bailed out that same year at the peak of the credit crisis. Funds ShrinkAmong TPG’s top-performing funds is the pool it raised in 2000, which has produced a 2.45 times return on invested capital, according to data from Oregon. Separately managed accounts are reshaping the model for the biggest private-equity firms, which traditionally pooled money into funds with the same terms for multiple investors, such as a 2 percent management fee and as much as 20 percent in a share of profits known as carried interest. Those funds are shrinking for the first time as investors have become more selective about which firms to back since the 2008 financial crisis. There is also more competition for a smaller pool of investor money, with 1,872 private-equity firms collectively seeking $801 billion from investors, according to data from London-based Preqin. KKR is seeking $10 billion for its newest flagship fund, 43 percent less than it raised for its predecessor. Blackstone has finished raising its latest buyout fund at $16.2 billion, a fifth smaller than the prior fund. Investor CautionSeparately managed accounts can allow private-equity firms to deploy investors’ capital into deals outside existing funds. Joncarlo Mark, formerly a senior portfolio manager at California Public Employees’ Retirement System, said investors should be aware of potential risks. “Typically, investment mandates in big buyout funds are broad enough that managers can invest in almost anything,” said Mark, founder of advisory firm Upwelling Capital Group in Sacramento, California. “Since there’s a lot of flexibility already, investors should be cautious about whether separate account money goes toward investments that are consistent with their risk-adjusted return expectations. One bad deal could eat all the fee savings of the separate account.” Calpers, the largest U.S. public pension plan, pioneered the model of special partnerships with managers a decade ago. The earliest of these deals resulted in Calpers owning a stake in the managers themselves. By 2008, Calpers had amassed ownership shares in Silver Lake Partners, Apollo and Carlyle. |
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