The Teachers’ Retirement System of the State of Illinois has committed a total of $150 million to Blackstone Capital Partners VI, GI Partners Fund III and Edgewater Growth Equity Partners III. The pension will allocate $50 million apiece to each of the funds.
The Blackstone Group’s core private equity franchise was initially targeting $20 billion for its latest vehicle amid a difficult fundraising environment for buyout funds. The New York-based group, a PEI 50 firm, has reportedly considered lowering its target to $15 billion.
The $50 million commitment is the first Illinois Teachers’ has made to a Blackstone buyout fund, although the pension has committed to the firm’s real estate vehicles, according to a pension spokeswoman.
California and UK-based GI Partners targets middle market buyouts of asset-intensive businesses in the US and Europe. Edgewater is a Chicago-based growth equity firm that invests in companies with revenues between $20 million and $500 million. Both firms are new relationships for Illinois’ Teachers, who declined to provide further description of the funds.
The $38.3 billion pension approved the private equity commitments at its board meeting yesterday. The system provides benefits to more than 350,000 teachers and administrators employed at Illinois public elementary and secondary schools outside the city of Chicago.
Illinois Teachers’ currently has a target allocation to private equity of 8 percent, and earlier this summer was considering commitments to the asset class of between $800 million and $1.2 billion in 2009, according to the Illinois Teachers’ investment committee minutes. The fund currently has a 6.3 percent actual allocation to private equity, which has yielded returns of more than 20 percent each of the last three years.
The pension also said it is cooperating in a federal investigation of an alleged conspiracy designed to extort illegal kickbacks from real estate investment firm Capri Capital seeking commitments from the pension. The conspiracy allegedly involved Tony Rezko, a wealthy Chicago real estate investor with political links to Democratic presidential candidate Barack Obama.
The pension did not comment further on the investigation.