Maryland bets big on PPIP funds

The Maryland Retirement System committed almost $1 billion to real estate and private equity funds in the fourth quarter, staying on track as one of the most active private equity investors this year.

The pension, with about $32 billion in assets, made a big bet on the US government’s Public Private Investment Program (PPIP), which helps private investors buy AAA-rated commercial and residential-backed mortgage securities issued before 2009 from banks.

Maryland committed $100 million to the RLJ Western Asset Management PPIP vehicle, a venture between The RLJ Companies and Western Asset Management. The pension also committed $75 million to funds run by Wellington Management and $50 million each to Marathon Asset Management’s and Angelo Gordon/GE Capital Real Estate’s PPIP vehicles.

Oaktree Capital Management received $200 million from Maryland, split in half between the firm’s eighth opportunity fund, targeting between $4 billion and $6 billion, and its fifth principal opportunities fund, targeting $5 billion for “loan-to-own” investments. White Deer Energy, the debut fund of former president of First Reserve Ben Guill, got $35 million from Maryland.

Debt has also become a top investment focus for Maryland. The pension committed $25 million to LBC Credit Partners II, a $750 million fund that makes asset-based loans in sizes ranging from $10 million and $30 million. LBC is backed by Lubert-Adler co-founder Ira Lubert and is part of the umbrella organisation, which includes Lubert-Adler Real Estate and LEM Mezzanine, another firm in which Lubert is a partner.

Maryland also invested €50 million in Park Square Capital Fund II, with a €1.5 billion target, and €25 million in Merit Capital Partners fifth mezzanine fund, which is targeting a maximum of $650 million. Finally, the pension invested $75 million in a Landmark Partners secondary fund, and $25 million in Azure Capital Partners III, which is targeting $250 million.

Mansco Perry, the pension’s chief investment officer, plans to continue investing heavily in private equity, as well as debt strategies. The pension in September created a separate bucket for debt-related strategies with room to encompass 5 percent of the fund’s total assets.

Maryland is interested in forming “long-term relationships” with some general partners, Perry said. “I’m hoping that we’ve earned a lot of GP respect, or at least it’s recognised that we’re committed to the asset class.”