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SOURCE:  Oregonian

Oregon Investment Council approves $250 million of pension funds to KKR

Ted Sickinger, The Oregonian

May 29, 2013

The Oregon Investment Council approved another $250 million commitment of public pension money to its favorite money manager, Kohlberg Kravis Roberts, at it meeting Wednesday.

The commitment is a follow on investment to a North American buyout fund that Oregon put $525 million into in 2011. KKR is the largest single manager of Oregon pension money, with some $2 billion invested.

Despite big distributions from private equity managers this year, the pension fund still has some 22 percent of its portfolio allocated to private equity, well above its 16 percent target. The council shows little sign of taking its foot off the gas, however, and is considering a change to its target investment mix that would accommodate its current exposure to the sector.

KKR founder and co-chief executive George Roberts told the council that distributions from existing funds were well ahead of prior expectations. He said Oregon is looking at a 17.2 percent net return on its $1 billion investment in KKR's 2002 fund, and a 7.8 percent return on its $1.5 billion commitment to KKR's 2006 fund. Much of the 2006 returns are unrealized, and Roberts admitted that KKR made some big mistakes in 2006, including its huge bet on the Texan utility TXU Corp.

He offered an upbeat assessment of the U.S. economy that he says is likely to persist for the next couple years.

"We don't need this capital, but we do think this is a good time to be investing in North America," he said. "You all are our longest standing partner. We always start with you."

Private equity had its detractors at the meeting. During the meetings public comment period, employees from Caesar's Entertainment in Las Vegas urged the council to oppose the "windfall fees" being extracted from the company by two fund managers that Oregon has invested with: Apollo Global Management and Texas Pacific Group.

Council members also heard from local investment manager Bill Parish, who suggested that they should closely scrutinize private equity firms harvesting of tax deductions from the companies they invest in.

– Ted Sickinger

Bill Parish
Parish & Company
10260 SW Greenburg Rd., Suite 400
Portland, OR  97223
Tel:  503-643-6999 

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