Administrators of the Arkansas Teachers’ Pension System on Wednesday authorized an investment of up to $ 30 million in the buyout fund of a San Francisco-based company that will invest in small and mid-size software and services companies cut.
The investment will be made in the Alpine Investors VIII fund.
The Teachers Pension System is the state’s largest government pension system with approximately $ 21 billion in investments and over 120,000 active and retired members.
Alpine Investors, founded in 2001, is seeking total capital commitments of $ 1.7 billion for its VIII fund with a cap of $ 2 billion, said Michael Bacine of Pennsylvania-based private equity consultant Franklin Park.
The fund will target companies in need of new direction either because they are poorly managed, the founder is retiring or they are in the process of being separated from a larger company, he said. told the system investment committee, which recommended the investment.
“The difference here is that they form a group of experienced professionals to be the CEOs of the companies that they ultimately invest in, so they do it up front and really identify them before they even find a company, and then they… end up executing. their playbook to improve the operations of existing businesses, ”Bacine said.
The seven funds of Alpine Investors had a gross internal rate of return of 22.2%, according to Franklin Park’s written report to the trustees.
Administrator Susannah Marshall, who is the state’s banking commissioner, asked Bacine if Alpine Investors had ever identified cybersecurity issues.
Bacine said the company had not had such problems.
“As for the underlying companies, … why we love industry groups like Alpine and many others you’ve heard of is that they are experienced in the space and aware of these issues. potentials and seek them out in their businesses, ”he said. “I am not aware of any issues they had in their wallet.”
In the remaining cases, the trustees voted to give system staff the option of issuing a request for qualification or request for proposals to assess and identify investment consultants for direct system investments.
The scope of requests will include recommendations for new direct investments and ongoing monitoring and management of existing and new direct investments.
“We may have to use the [request for proposals] process because it uses pricing in assessment … as opposed to [request for qualifications] process that doesn’t take price into consideration at all, ”system executive director Clint Rhoden told administrators.
“We would just like to have a little more flexibility to move forward with this process.”
On June 7, the Trustees voted to authorize the system to issue an application for qualifications to investment consultants to review and make recommendations on the system’s direct investments and the ongoing monitoring and management of those investments.
At that meeting, the Trustees also voted to change the system’s investment policy to prohibit the system from approving “any material change” in any direct investment without first receiving written advice or recommendations from a third party investment consultant and, if necessary, an external legal advisor. legal counsel, as well as to receive the written approval of the Investment Committee of Trustees and the full Board of Directors.
System officials said they previously required the recommendation of an investment consultant and board approval for an initial direct investment and that system management informed the board chairman of any plans to move forward. restructuring of initial direct investment. The board was informed later.
The policy change in June came after Arkansas legislative audit said the system failed to get an investment consultant review and recommendation or board approval for the system reinvesting $ 58 million in collaboration with several parties to execute a promissory note at Big River Steel, totaling $ 290 million in May 2019 and for converting $ 48 million in loans to Highland Pellets into equity in June 2020. The committee of the Joint Legislative Audit Committee on State Agencies voted twice to postpone action on this system audit.