The Orange County Employees Retirement System has picked a team of advisers to help direct how it invests $175 million in private equity funds.
The move marks a return to investing for the county retirement fund, which stopped setting aside money three years ago amid the technology and larger economic downturn.
“We had a short hiatus where we didn’t make any private equity investments,” said Keith Bozarth, chief executive of the pension fund, known as OCERS. “We still have money in the private equity markets because they are long-term investments. We just weren’t making any new commitments.”
Now the retirement fund plans to “make periodic commitments on a fairly regular basis,” Bozarth said.
Three Advisers
The pension board tapped three advisers, each dubbed a “fund of funds.”
A fund of funds is an adviser that helps direct how money gets invested in private equity funds.
Just as a mutual fund invests in a number of different securities, a fund of funds holds shares of many different private equity funds.
The newly tapped advisers:
– New York-based Abbott Capital Management LLC, which is handling $75 million for OCERS.
– Chicago-based Adams Street Partners LLC, which is handling $50 million.
– Portfolio Advisors of Darien, Conn., which has another $50 million.
The firms beat out HarbourVest Partners LLC of Boston, Mesirow Financial Holdings Inc. of Chicago and Pantheon Ventures Ltd. of London.
About OCERS
Santa Ana-based OCERS provides pension benefits to more than 34,000 active and retired workers in county government.
Members also come from other agencies, such as the Orange County Transportation Authority.
The $6.4 billion pension system’s return to the private equity sector has been in planning since the start of this year.
That’s when the OCERS board decided to put its entire “alternative investment” allocation of 5% into private equity.
Investments
The pension system now holds about 2.5% of its money in private equity investments, according to Bozarth.
That investment has earned an 11% rate of return in the past decade.
In the past three years, the investments saw a 17.7% return.
“Private equity has performed well as an asset class,” Bozarth said.
The fund shied away from investing in recent years, spooked by the tech bust starting in 2001.
Memories of the county’s bankruptcy back in the early 1990s also were a factor.
At the time, “the board wanted to take its foot off the gas pedal,” Bozarth said.
