Minnesota State Board of Investment make $625 million private market commitments

By Muskan Arora

Minnesota State Board of Investment has made new European commitments to its private equity, real assets, real estate and private credit sleeve of up to $625 million. 

In the real assets sleeve, the $142.1 billion system has committed up to $200 million to KKR Global Infrastructure Investors V. 

The fund will focus on investments in existing assets and businesses located in OECD (Organization for Economic  Co-operation and Development) countries in North America and Western Europe. 

Similar to Minnesota’s investing goal of generating high returns with low risk, (Minnesota holds a one year return of 8.9% and ten year return of 8.8%); KKR also focuses more on risk-based strategy than sector-based strategy with an eye for critical infrastructure investments with low volatility and strong downside protection.

Minnesota’s real assets manager roster includes BlackRock, KKR and Encap Energy among others.  

In its real estate bucket, the system allocated an additional $125 million to AG Europe Realty Fund IV to invest in commercial and residential real estate in Europe. 

The investment will include traditional spaces like industrial, residential, hotel and retail, alternative assets namely life sciences, data centers and self-storage areas among others. 

In 2023, the system committed $100 million to AG Asia Realty Fund V, and first made commitment to the manager in 2014. 

Angelo Gordon employs a value-add approach with business plans ranging from modest lease-up and operations improvement to more significant value-add strategy which may require complete capital restructuring or repositioning. 

Value add strategy would allow the system to benefit from the current environment of rising rate of interests, higher inflation levels and regulatory changes in Europe. 

Angelo Gordon & Co’s real estate equity strategy focuses on acquiring sub-performing commercial real estate across a range of geographies and product types. 

The manager roster for the real estate sleeve includes KKR, Carlyle Group and Rockpoint among others.

In its private equity bucket, Minnesota has allocated up to $175 million to Blue Owl GP Stakes VI. 

The fund focuses on acquiring minority equity interests in leading institutionalized PE firms that are positioned for sustained stability earning with a potential of upside growth. 

In Meketa’s capital markets expectation report for 2024, EBITDA multiple, leveraged and public VC valuations are major return factors for PE sleeve. 

The manager roster for private equity bucket includes Adams Street Partners, CVC Capital Partners and Apax Partners among others. 

In the recent meeting, Minnesota made another commitment of up to $125 million Permira Strategic Opportunities I, private credit manager, who will focus on opportunistic and special situations credit investing in Europe. 

Consistent with other Permira’s strategies, the manager will emphasize capital preservation, evaluating potential risks and modelling appropriate downside scenarios for each investment to ensure protection of the asset.

The manager roster for the private credit bucket includes Brookfield Asset Management, Gold Hill and TCW among others. 

The due diligence process for all these investments included reference checks, database searches and review of the Fund’s potential investor base.