News & Analysis

Maryland commits $340m to private equity including $100m to Lexington fund

The pension will not look for new commitments for a while as it takes time to monitor the state of the private equity industry.

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The $32 billion Maryland Retirement System has recently committed $340 million to private equity, and has more commitments “in the hopper” that it plans to complete in the near future.

But once it flushes out its pipeline, the pension plans to step back from private equity investing for a while.

The pension has committed money to a wide array of firms in recent months. Maryland gave $100 million to Lexington Partners seventh fund, which has been targeting $5 billion; $75 million to Clayton Dubilier & Rice VIII, targeting $5 billion; $50 million to Prudential Capital Partners III, targeting $900 million for mezzanine investments; $25 million to Littlejohn Fund IV, targeting $1.3 billion; $25 million to Peninsula Capital Partners V, a mezzanine fund; $50 million to Alinda Capital Partners II, an infrastructure fund targeting $3 billion, and $15 million to Camden Partners Strategic Fund IV.

The pension, which jacked up its allocation to private equity from 5 percent to 15 percent a year ago, cut the allocation percentage to 12 percent at its investment committee meeting last week.

Maryland plans to divert some funds from private and public equities and cash into a credit and debt strategy category that will include mezzanine and distressed debt investments, according to Mansco Perry, the pension’s chief investment officer.

Currently, Maryland’s actual allocation to private equity stands at around 4 percent, Perry said.

“We’ll stop looking at new stuff so we can get our work in progress done and sit back and reflect,” Perry said about private equity investing. Maryland has no timeline in place for when it will again look for new commitments, he said.

The CIO wants to take a step back and see how the industry shakes out through the downturn, Perry said. GPs have not drawn down any capital from Maryland, nor has the pension seen any distributions lately, he said.

Maryland is not looking to sell any of its private equity holdings on the secondaries market, he said.