By Jon Peterson
Indianapolis-based Indiana Public Retirement System has allocated a total of $150 million into two commingled funds managed by San Francisco-based Stockbridge Capital Group. The commitments were $75 million each into Stockbridge Value II and Stockbridge Smart Markets Fund.
Stockbridge did not respond to phone calls and e-mails seeking comment for this story. Both of the commingled funds will have the San Francisco Bay Area as one of its targeted markets. Stockbridge Value II is targeting the West Coast generally, but also the East Coast and the Sunbelt regions of the country.
Fund II is a closed-end commingled fund where Stockbridge hopes to have a total equity raise in the range of $400 million to $500 million. The final close on the capital raise could happen in December.
Stockbridge is planning to buy a mixture of office, industrial, retail and apartments for the commingled fund. These assets will generally include properties that the manager deems undervalued, not utilized correctly or otherwise not operating to its full potential.
Investors who have placed capital into Value II are projecting to achieve a 12 percent to 15 percent gross IRR and a 10.4 percent to 13 percent net IRR. These returns will be based on 50 percent coming from operating income and the balance from appreciation of the assets.
The new commitment to the Smart Markets Fund represents the second time that the Indiana retirement system has placed capital into this commingled fund. The initial $75 million commitment was approved for the fund in December of 2012.
The pension fund stated in an e-mail that it felt this investment was a good fit within the system’s overall asset allocation and investment objectives.
The Smart Markets Fund has an open-ended investment structure. This means that it will continue to be open to investors to place capital into the investment fund. Closed-ended commingled funds, on the other hand have a specific time period within which capital can be raised.
The Smart Markets Fund is planned only to acquire core assets. It favors characteristics of the San Francisco Bay Area region: proximity to major universities and highly educated workforce. The commingled fund also favors regions that are near innovation in some of the fastest growing industries of technology, biotechnology, healthcare and energy.
The Smart Markets Fund will look for mixture of assets in the office, industrial, retail, apartments and mixed-use sectors nationwide. The targeted returns for the commingled fund are a 9 percent gross IRR and an 8.4 percent net IRR.