San Diego County Employees Retirement Association committed $50 million to a middle-market private equity evergreen fund managed by Public Pension Capital, subject to pension officials' final review of the limited partnership agreement, spokeswoman Mary Montgomery confirmed in an e-mail.
This is the $11 billion pension fund's first investment with Public Pension Capital, a private equity firm formed by two former KKR executives.
The fund structure is unusual in that the management fee is budgeted each fiscal year starting April 1, rather than set at the beginning of the fund's life by the general partner, according to agenda materials for the board's Oct. 20 meeting. The current management fee is 1.49%. All transaction and portfolio company monitoring fees are budgeted. The management fee is expected to decline as Public Pension Capital increases the fund's capital base. Carried interest will be based on the fund's returns, ranging from zero carried interest for an internal rate of return of zero to 4%, up to carried interest of 10% for an IRR of 8% or more.
Investors can either increase their commitments annually or, after an initial three-year investment period, decrease their unfunded commitments each year.
A board of investors approves the admission of additional investors and sets the size of the fund each fiscal year.
Public Pension Capital's goal is to have 15 to 20 investors commit an ongoing pool of capital of about $1 billion.