BlackRock is shopping a new all weather-type perpetual private equity investment vehicle with a $10 billion fundraising target that would own typically minority stakes in companies for a very long time, sources said.
The firm is attempting to align participating investors' assets with their liabilities and eliminate the cash drag of typical private equity funds by investing the capital immediately in securities which BlackRock executives would later sell to invest in private companies. The typical private equity fund calls capital as needed, requiring limited partners to invest the committed but uncalled capital in short-term, low-return investments. The vehicle would be able to hold companies indefinitely rather than needing to find an exit when the fund nears the end of its lifespan.
Chief investment officers have been asking for long-term vehicles that would offer returns in between private equity and stocks, which is referred to as core private equity, said Christopher Ailman, CIO of the $225.3 billion California State Teachers' Retirement System, West Sacramento. CalSTRS is a longtime investor with BlackRock, and executives are looking at the new strategy, which combines BlackRock's expertise in beta strategies with very long-term investments in private companies.
In November, CalSTRS amended its private equity policy to add exposure to core private equity, Mr. Ailman said. Core private equity has an interim target of 2% of the pension fund's private equity portfolio and a 5% long-term target. CalSTRS' target allocation to private equity is 8%.
The new BlackRock vehicle will make roughly $1 billion investments in private companies impacted by themes, including a growing middle class in developing countries and millennial spending. The vehicle could use leverage, but that is not the prevailing model for making investments, sources said.