The public pension fund commits almost $1 billion

By Ted Sickinger / The Oregonian

Published Jan 30, 2014 at 12:01AM

The citizen’s panel that oversees Oregon’s public pension fund on Wednesday voted to invest nearly $1 billion in two private equity funds managed by TPG, originally known as Texas Pacific Group.

The Oregon Investment Council voted to commit $700 million to TPG’s Strategic Partnership Account and another $250 million to TPG’s TSSPAdjacent Opportunities Partners L.P. The commitment represents 7 percent of the pension fund’s $14.3 billion in private equity investments, which is about 21 percent of the $68 billion pension fund

TPG hopes to raise a total of $10 billion in the first fund, which targets its traditional sweet spot: corporate buyouts, requiring an equity investment between $250 million and $600 million, according to staff at the Oregon Treasury’s investment division.

The second is a $2 billion special situations fund that targets an eclectic mix of investments, such as drug royalty streams, European bank loans and residential and commercial real estate loans.

Oregon’s pension fund was an early investor in TPG. It committed $50 million to the firm’s first fund in 1994 and has invested a total of $2 billion in six past TPG buyout funds. Its remaining investment in those six funds totals about $1.2 billion.

TPG cofounder David Bonderman told the council Wednesday that Oregon has more than doubled its money on its investments with TPG.

Results have been uneven, however, with several of the funds delivering stellar returns, and more recent funds, notably the 2006 fund in which Oregon invested $300 million, delivering poor performance.

The 2006 and 2008 funds, TPG Fund V and Fund VI, made a disastrous $1.35 billion bet on Washington Mutual shortly before the government seized that bank, resulting in a total loss of capital. Asked Wednesday for the lesson learned from that transaction, Bonderman said, “Don’t trust the federal government.”

The 2006 fund was also an investor in the $45 billion takeover of TXU Corp., a utility deal struck at the height of the buyout boom in 2007. That deal is a loser for all participants, including another private equity fund run by Kohlberg Kravis Roberts in which Oregon invested.

Bonderman said Wednesday that the 2006 fund “is going to turnout to be okay, but not great. “It’s not going to cause anyone to lose any money, even with those two deals.”

Pension’s unfunded liability cut in half

PORTLAND — Strong investment returns and last year’s cuts to public-employee retirement benefits have helped cut the Oregon pension system’s unfunded liability in half.

Public Employees Retirement System director Paul Cleary spoke Wednesday to a citizen panel that oversees pension fund investments. Cleary said the unfunded liability dropped from $16.3 billion at the end of 2011 to $8.1 billion at the end of last year.

The pension fund now reportedly has 87 cents in assets for every dollar of liabilities.

—The Associated Press