PRIM, which manages the pension assets of the Bay State’s public employees, has now invested $500 million in private equity year-to-date in 2005, more than all of 2004 combined, according to the Boston Business Journal.
Combined with this increase in alternative allocation has come a drive to increase the amount that the pension fund can put into one investment. The charge, led by new chief investment officer Stanley Mavromates, has resulted in a new investment ceiling of $125 million, up from $75 million in year’s past.
PRIM wasted little time after the April 1 announcement of the ceiling increase in putting the money to work. Of the $278 million in new investments, over $200 million will go to two London-based buyout firms; CVC Capital Partners will receive $125 million from PRIM, while Montagu Private Equity will receive $78 million. CVC is a leveraged-buyout firm with a longstanding relationship with PRIM, while Montagu spun out of HSCB Holdings in 2003 and is a mid-tier player in the European M&A market.
PRIM has also allocated money to two US-based venture capital funds, which invest in the earlier stages of a company’s life than their leveraged-buyout brethren. Menlo Ventures of California will get $50 million for a new investment fund from PRIM, while Insight Capital Partners of New York will get $25 million. Insight will focus on later-stage software opportunities in one fund in which PRIM is invested, and will get in on larger deals made by other firms in another fund.
PRIM is not alone in its move to rely more heavily on private equity investments. Recently, Mississippi made the move to invest up to 10% in these alternative vehicles, while New York City has decided to double its investment in such vehicles (See Mississippi Allows Pension Fund to Allocate 10% to Private Equity and New York City to Double Private Equity Investment ). In November, New Jersey decided to make a similar move and the Governor of New Mexico is also expected to sign a similar law that would allow that state’s pensions to invest in private equity.