HARTFORD, Conn. -- Treasurer Denise Lynn Nappier is negotiating with 12 State of Connecticut Retirement & Trust Fund alternative investment managers to reduce $950 million in commitments her predecessor made in the last quarter of 1998.
As of Sept. 30, the state had 30 alternative investment managers, according to Pensions & Investments' data from the fund.
The decision to roll back commitments follows Ms. Nappier's review of the partnerships, which was conducted at the request of the Investment Advisory Council.
"The council had publicly expressed concern about the high level of commitments to alternative investments made during the fourth quarter," explained Howard Rifkin, deputy treasurer.
Mr. Rifkin declined to say how much in commitments would be cut.
In the fourth quarter of 1998, under former Treasurer Paul J. Silvester, the pension fund made commitments of $625 million to seven new private equity partnerships, $125 million in commitments to three existing partnerships, and $200 million to two new real estate partnerships.
As of Dec. 31, the $18.5 billion fund had $3.56 billion committed to private equity and $900 million invested in partnerships.
The council was concerned that if a lot of the partnerships called for capital at the same time, the fund's target allocation of 11% to alternatives would be exceeded, Mr. Rifkin said.
"Most of the state's private equity commitments were made between July 1, 1997, and the end of 1998. Those were two vintage years. We're already seeing some capital calls in higher amounts than anticipated. If the trend continues, we could be above our policy goal."
Mr. Rifkin emphasized another consideration was whether the latest commitments are diversified. They were mainly in mezzanine, leveraged buyouts and early stage financings. "We have been looking at the industries that the partners are in and want to be sure that they are balanced," he said.
Negotiations are very sensitive and still under way, he said.
"Our strategy is to go to each partner and ask for a reasonable reduction in our commitment," Mr. Rifkin said. Pension fund officials are still meeting with representatives of the partnerships and hope to complete the first round of meetings by March 26.
In some instances, Connecticut legally could dissolve its contract, Mr. Rifkin noted: "If the state holds the only equity in a partnership or a certain percentage, it could exercise its right as a limited partner to get out of the fund. But we would rather negotiate voluntary reductions."
Eric Bomze, general partner at Greenwich Street Capital Partners, New York City, said he hadn't heard anything about a reduction. "It sounds unusual," he said. The state made a first-time $50 million allocation to the firm's Greenwich Street Capital Partners II, an opportunistic buyout fund, in the fourth quarter of 1998.
Executives at all of the other partnerships in which the state made fourth-quarter investments declined comment. The new partnerships are: Keystone Ventures Fund; Crescendo Venture Fund III; Pharos Capital Partners; Triumph Connecticut Partners; Thayer Equity Investors IV; and Carlyle Asia Partners.
The partnerships that received additional commitments are Pioneer Ventures Fund; The Veritas Group; and Landmark Partners VIII.
The two new real estate partnerships, which each received $100 million, are Westport Senior Living Investment Fund and PaineWebber Real Estate Fund II.
