Two pension fund investment management subsidiaries have closed their first private equity funds for external investors, with heavy commitments made by the pension fund sponsors.
General Motors Asset Management, New York, raised $400 million for its GM Capital Partners I, a co-investment fund. The $64 billion General Motors Corp. defined benefit fund committed an additional $300 million to it, said Charles Froland, managing director private markets. It's the first fund GEAM has offered to outside investors.
AMR Investment Services, Fort Worth, Texas, raised $64 million for its American Private Equity Partners fund of funds. Another $160 million to $200 million will by invested by the $5.5 billion American Airlines pension fund.
The strategies of the two funds are quite different. GEAM will invest alongside its best general partners, said Mr. Froland. "We find the best firms, then the best (general partners) in the firm, and then those GPs' best deals, and invest in those deals for this fund. It will be fairly evenly balanced between buyout and venture, but can range from 10% to 20% in either direction," he said. "We will be broadly diversified, and try to capture the best performing set of deals."
Middle-market buyouts
AMR, in contrast, will focus mainly on middle-market buyouts. It is only investing with firms the American Airlines pension fund has invested with in the past. Investors are smaller pension funds that only can make commitments of $2 million to $10 million, said William Quinn, president of AMR.
AMR already committed $20 million to Fremont Partners, San Francisco; and $15 million to Hicks Muse Tate & Furst Inc., Dallas. It plans to commit similar amounts to Castle Harlan Inc. and Evercore Partners Inc., both of New York, later in the year when they hold final closings on funds they are raising.
When AMR began marketing its fund of funds more than a year ago, it was targeting $100 million. "We had hoped to raise more than we did, but the environment changed," Mr. Quinn said.
GEAM's Mr. Froland said the new fund already invested $100 million in the last year: two telecommunications deals and two software deals in the venture category, and three buyout deals in telecommunications services, industrial and insurance. "We are generalists and don't concentrate on any particular sectors, although we are restricted from investing in tobacco and gaming stocks." He added there are loads of businesses in need of capital and his team has looked at more than 200 deals in the last year.
Commitments to the GEAM private equity fund include $100 million each from the $112 billion New York State Common Retirement Fund, Albany; and the US$21.7 billion Ontario Municipal Employees Retirement Board and US$8.3 billion Canada Pension Plan Investment Board, both of Toronto.
