SALEM, Ore. -- The $27 billion Oregon Public Employes Retirement Fund placed $100 million with an international alternative equity fund of funds being formed by HarbourVest Partners of Boston.
It is Oregon's third investment in eight years in international private equity funds run by the HarbourVest principals. (HarbourVest was formed last year when the management of Hancock Venture Partners Inc. bought the firm from its then-parent, John Hancock Mutual Life Insurance Co.)
HarbourVest International Private Equity Partners is approaching a second closing in the range of $1.2 billion to $1.4 billion, said Kevin Delbridge, a managing director. The fund will consist of a partnership component of approximately $1.2 billion and a direct-investment component of about $300 million. The partnership component will invest in various limited partnerships, while the direct-investment component will make direct investments in companies. Oregon is investing 80% of its allocation in the partnership component. The fund's first closing of $570 million was in December.
The financial turmoil in Asia creates "a real buyer's market" for investors with deep pockets, D. Brooks Zug, senior managing director, told members of the Oregon Investment Council, which oversees the Oregon fund.
"There is not capital available through more traditional sources. We believe the private equity markets will fill that void."
HarbourVest principals said they expect to invest about 20% of the new fund in Asia, 20% in Latin America and other emerging markets, and 60% in western Europe.
Principals said the first Hancock International Private Equity Partners fund, which was formed in June 1990, had a net internal rate of return of 15.4% through Sept. 30. The second fund, which was formed in May 1995, showed a net internal rate of return of 7.4% for its partnership component through Sept. 30. It showed a 16.7% net internal rate of return on its direct investment component, they said. They said both funds are on track to achieve target returns of 20% or more.
According to material prepared by the Oregon Treasury, HarbourVest will charge the state a blended management fee over the 14-year life of the partnership of 1.08%.
Also, the Oregon pension fund placed $100 million in alternative equity capital with Joseph, Littlejohn & Levy, which is organizing a $1 billion fund. That fund, which will invest in and restructure underperforming companies, had a first closing of $657 million in December.
The Oregon employees fund had $2.7 billion, or about 10%, in alternative equities at year end; with the new investments, the total grows to $2.9 billion.
Earlier, the fund invested $250 million with each of three international equity managers, Brandes Investment Partners, Driehaus Capital Management and Sanford C. Bernstein. Funding came from money freed up last spring with the fund terminated Baring Asset Management and Decision Services.
