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Oregon to create $300m international fund with Hamilton Lane

The separate account will target investments in funds with commitments of up to $1bn that focus on international markets.

The Oregon Investment Council has preliminarily approved committing a total of $300 million to investment advisor Hamilton Lane for a separate account that will focus on international investments.

The fund, called the International SMID fund, will target smaller established and emerging private equity funds with commitments of up to $1 billion or €1 billion. The pension will use 80 percent of the $300 million to invest in funds focused on international markets. The remaining 20 percent may be invested in US-focused funds, subject to staff approval.

OIC’s current small- and mid-market private equity mandates, run by Pathway Capital Management and Grove Street Advisors, are focused on US-based funds. OIC manages about $65 billion in assets among several state pension plans. OIC will consider final approval for the fund in January.

“A separate account mandate … would provide [the pension] with exposure and access to international investment partnerships that, by virtue of size, geographic spread and number of relationships, would be difficult, if not impossible, to make directly,” according to internal pension documents.

“This proposed investment will allow [the pension] to cast a wider net in the private equity marketplace, and gain insight into an attractive set of partnerships with which it does not have a direct relationship,” pension staff said in the documents.

The investment will be structured over three years, with the pension investing $100 million per year in 2009, 2010 and 2011. The portfolio will be structured with about 30 to 50 percent going to buyouts, 40 to 60 percent for growth equity and 5 to 15 percent for special situations.

A pension source said it was unclear if an initial investment in the separate account will be made this year.

Separate accounts have become increasingly popular with limited partners. Apollo Management said in a recent filing with the US Securities and Exchange Commission that it was seeing more interest on the part of LPs for separate accounts.

“Institutional investors are expressing increasing levels of interest in [separately managed accounts], since these accounts can provide investors with great levels of transparency, liquidity and control over their investments as compared to more traditional investment funds,” it said.

Apollo has a separately managed account called the Apollo Palmetto Strategic Partnership with the South Carolina Retirement System. The fund totals $750 million and can be used for the pension to invest directly alongside Apollo, or in Apollo funds.