News & Analysis

Dallas Police & Fire pockets $161m from sale

The troubled US pension has sold 11 fund stakes across buyout, energy and growth strategies since accepting bids in November.

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Dallas Police & Fire Pension System (DPFP) has realised $160.7 million in cash inflows from the secondaries sale of 11 private fund stakes, according to its investment reports for January and February.

The $2.1 billion pension fund has been exploring the sale of a portion of its private investments portfolio. The portfolio for sale comprised 37 fund stakes across infrastructure, energy, buyout, growth, special situations and real estate strategies and had a $613.9 million net asset value as of 30 June, as Secondaries Investor reported in December.

DPFP sold eight fund stakes in December, generating sale proceeds of $132.8 million, and three fund stakes in January, gaining $27.9 million, its monthly investment reports showed.

The January sales involved funds managed by Merit Energy, which had a market value of $33.3 million as of December, and was generating a loss of 23 percent net internal rate of return for the one-year period to 31 December, according to its meeting agenda for 9 February.

The Texas pension, which lost its chief investment officer in July, had to stop allowing withdrawals in December amid plummeting returns.

As of 31 January, DPFP’s total private investments portfolio had $1.39 billion in assets – $318.4 million in private equity, $60.9 million in private debt and $1 billion in private real assets, the investment report indicated, representing a 61 percent actual allocation to private investments, almost double its 32 percent target allocation.

It showed that the pension is heavily overweight in private equity, which accounted for 14 percent of its total portfolio, well above its 5 percent target allocation.

The fair value of DPFP’s private equity portfolio depreciated 21 percent in the year to 31 December 2016.

The 11 secondaries sales, and the proceeds generated from each, from December and January were:

  • Levine Leichtman Capital Partners’ LLCP V, $22.6 million
  • Levine Leichtman Capital Partners’ LLCP IV, $16.4 million
  • Levine Leichtman Capital Partners’ LLCP Deep Value II, $18.4 million
  • Kainos Capital, $19.8 million
  • Kainos Co-Investment, $12.3 million
  • BankCap Partners’ BankCap Opportunity Fund, $18.3 million
  • Pharos Capital Group’s Pharos II, $6.7 million
  • Pharos Capital Group’s Pharos III, $18.3 million
  • Merit Energy’s Merit E, $2.0 million
  • Merit Energy’s Merit G, $20.2 million
  • Merit Energy’s Merit H, $5.6 million

These funds span buyout, growth and energy strategies.

DPFP was not available to comment.