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Maryland bets big on PPIP funds

The pension has been one of the most active investors this year and plans to remain active in 2010.

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.”