By David G. Barry
Concerns about Sentinel Capital Partners’ diversity efforts
have led the Pennsylvania State Employees’ Retirement System (SERS) to
postpone committing to a pair of funds that the middle-market private equity
firm is raising.
The move by the $39.9 billion fund is significant because it may lead other
institutional investors to look more closely at the diversity composition of
firms – something that some female private equity professionals have sought for
some time.
Questions about Sentinel were first raised at a June 3 meeting of SERS’
Investment Committee. The firm had indicated in a SERS’ questionnaire that it
had a mentoring program for women and minorities. But a follow-up response from
the New York firm seem to indicate that was not the case.
Those answers led several board members – most notably Dan Ocko, who is
the designee for state Rep. Dan Frankel – to express concerns about
backing the firm. Ultimately, the investment committee voted to approve $100
million to Sentinel Capital Partners VII, L.P. and $25 million to Sentinel
Junior Capital II, L.P. with three members – including Ocko – voting no. https://www.marketsgroup.org/news/SERS-Private-Equity.
At most institutions, an affirmative vote by the
investment committee is usually followed by approval from the full board. But
at its June 10 meeting, the SERS’ board decided 6-5 to postpone voting on the
fund indefinitely. However, several members indicated that they would be open
to reconsidering the funds once Sentinel returns with additional information on
its diversity efforts.
With Sentinel looking to close the fund in July there is a possibility that SERS
may not end up in the funds.
Not committing to the funds could also impact SERS’ private equity pacing
target.
The full board did follow the lead of the investment committee and approve $100
million to Veritas Capital Fund VIII, L.P., and $25 million to Veritas
Capital Sidecar Co-Investment Vehicle.
With those commitments, SERS will have committed $685 million to private equity
funds – roughly halfway to its $1.1 billion target.
Other private equity firms that SERS has committed to during the fiscal year
include Thoma Bravo, Francisco Partners, Ares Management, LEM Capital, PSG
Europe and Clearlake Capital Partners.
The board also followed the investment committee and approved a $100 million
allocation to Blackstone Real Estate Partners X, L.P. – a fund that has
received backing from a number of other public pension funds and is on course
to be the largest-ever private equity real estate fund.