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Aurora receives $20m from San Bernardino County

The $5.8bn retirement system was attracted by the firm’s strong performance on its previous fund and limited use of leverage.

The San Bernardino County Employees’ Retirement Association committed $20 million to Aurora Capital Partners’ fourth fund at its meeting last week, according to documents.

Aurora is targeting $900 million for the fund and anticipates eight to 10 investments through the vehicle. Aurora Equity Partners IV had already raised $350 million as of San Bernardino’s commitment, according to pension documents.

The $5.8 billion retirement system committed $25 million to Aurora’s previous fund, which was generating a net internal rate of return of 17.72 percent and an investment multiple of 1.47 as of September, according to documents. That vehicle is San Bernardino’s top performing private equity investment, excluding co-investments.

In presentation materials provided by San Bernardino, Aurora indicated that it has adopted fund terms in compliance with Institutional Limited Partners Association standards. The firm’s management fee will fluctuate according to the fund’s size, charging 2 percent on the first $220 million in commitments; 1.75 percent on the next $780 million in commitments and 1.5 percent on any commitments over $1 billion.

The Los Angeles-based firm has already indicated that it will be investing in a steel drum manufacturer, according to documents. Aurora will likely target investments in the technology, aerospace, defense, healthcare, energy and transportation industries and expects to invest between $75 million and $150 million per transaction.

One of the reasons SBCERA committed to Aurora is the firm’s limited use of leverage in deals, according to the staff recommendation. The firm has generally invested with a debt-to-equity ratio of 1.1-to-1, compared to a 1.5-to-1 industry average.

San Bernardino has a 19.5 percent allocation to private equity on a 16 percent target. In January, the retirement system determined that it would target around $80 million in investments to private equity during 2012, with ranges of up to $40 million for distressed; $20 million for growth; $20 million for secondaries and $20 million for mezzanine, according to documents.

Last year, the retirement system promoted longtime investment officer Don Pierce to the role of chief investment officer. Pierce has been with San Bernardino since 2001, where he introduced international private equity and emerging market debt strategies to the retirement system.