By Muskan Arora
The $27.3bn Kansas Public Employees’
Retirement System committed $180m to buyout funds within its private equity
portfolio.
The system, along with consultant Mercer, allocated
$90m to Bridgepoint Development Capital V, a buyout fund focused on
European lower middle market companies.
The fund aims to make investments in services,
information technology and healthcare sectors primarily in the UK, France,
Nordics and DACH regions.
Further, KPERS committed up to $90m to Stellex
Capital Partners III, a buyout fund focused on opportunities in
middle-market companies.
The fund focuses on making middle-market,
value-oriented buyout investments in industrial, business services, aerospace
and defense, and food processing companies in the United States, Canada and
Western Europe.
Earlier this year, the system also
committed to Platinum Equity Small Cap Fund II, a buyout fund
focused on the lower-middle-market.
As of Dec. 31, the pension fund’s actual
allocation to alternatives was 10.8% against the target is 11%.
Historically, mid-market buyout strategies have a lower correlation to public equity markets as compared to large market buyouts and provide resiliency amidst economic uncertainty.
“There are still situations in the smaller
and middle market buyout funds where they might find an off-market deal or a
family-owned business that can really have some operational improvements,” said
Marcus Frampton, CIO of APFC told Markets Group.
Mid-market buyout strategy acts as a
continuation space for investors who are either being affected by the
denominator effect or want to stay invested in “high conviction names” of the
industry.
The denominator effect, alongside fed rates, has
placed allocators in a sticky position as when the markets were hot, GPs came
back on a faster cycle than before, which used to be every three or four years.
However, in the recent times, they are coming back after 18 to 26 months.
