Oregon Investment Council Commits Up to $950 Million in Effort to Maintain Strong Returns, Welcomes Appointee

Council also asks Legislature to approve reforms that will allow for better oversight of investment risk

The Oregon Investment Council approved a series of commitments worth as much as $950 million in an effort to maintain strong performance of the Oregon portfolio into the future.

At the same time, Council members also publicly asked the Oregon Legislature to approve a new blueprint that will allow the Council to better manage investment risk and reduce costs, at a time when the portfolio is growing increasingly global and complex. The Investment Modernization and Cost Reduction Act of 2013, introduced as Senate Bill 120, would convert the council into a semi-public corporation with more oversight authority and is awaiting action in Salem.

The commitments approved were:

• $300 million to Apollo Management LP for the Apollo Investment Fund VIII, a private equity fund that will make equity and debt investments in large corporate finance, targeted primarily at domestic opportunities.  Oregon has invested in two Apollo funds previously.
• As much as $400 million to Lone Star Funds for Lone Star Fund VIII, a real estate fund that will invest in financial companies, distressed debt and distressed real estate. Lone Star is the best-performing manager in Oregon’s real estate portfolio, and previous investments with the manager have yielded more than $1 billion in returns to the Oregon Public Employees Retirement Fund.
• $250 million to Blackstone Tactical Opportunities to create a fund that will invest in deals that are buffered from market fluctuations yet typically struggle to obtain traditional financing, such as smaller buyouts, financial institution breakups, re-insurance, and improving freight mobility. The new fund will be part of Oregon’s opportunities portfolio.

The new commitments are all with high-performing private sector investors whose yields have helped Oregon post the best investment returns over the past decade among peer funds nationally, according to an independent ranking from the Wilshire Trust Universe Comparison Service, a benchmark of asset positions and performance data for investment funds of different sizes.

At the same time, the new investments increase Oregon’s exposure to creative and so-called “illiquid” strategies that require long-term commitments of money – and are considered riskier than investments in traditional stocks and bonds. As part of Senate Bill 120, the OIC would get the authority to strengthen Oregon’s risk analytic capacity.

“To maintain Oregon’s track record of success, we will continue to scour the investment arena for the best opportunities — but we also are cognizant that the best-performing investments also carry higher potential risk,” said Keith Larson, chairman of the Oregon Investment Council, vice president of Intel Capital, and a member of the board of Regents at the University of Portland. “The new investment landscape requires more capacity and diligence, and we are urging the Legislature to recognize the imperative to strengthen Oregon’s public investment operation.”

The Council also noted the dismissal of a recent $1 billion lawsuit filed against the State and Oregon Investment Council in connection with Lone Star Funds. While the case was thrown out by a Marion County judge in pre-trial motions, it still resulted in six-digit legal costs which hurt beneficiaries, Larson said.

He called the suit “frivolous, shameful and lacking merit.”

The Council also twelcomed new appointee Rukaiyah Adams, the director of the capital markets investment group at The Standard in Portland.  She was appointed by Gov. John Kitzhaber, and then confirmed by the Oregon Senate. She will formally join the board at its May 29 meeting and will complete the term of former member Harry Demorest, who stepped down in March. The term expires in January 2014.

Adams was the Chief Operating Officer and Director of Investments at IAM Asset Management.  Adams was involved in the 2008 U.S. Presidential election as a voter rights lawyer for Counsel for Change, the Obama campaign’s legal team.  She serves on the board of Portland Center Stage and the finance committee of Planned Parenthood, Columbia-Willamette Valley.  Adams holds a BA from Carleton College, a JD from Stanford University and an MBA from Stanford University.

The Oregon State Treasury protects public assets and saves Oregonians money through its investment, banking, and debt management functions. State investment policies are overseen by the Oregon Investment Council. The State Treasury also promotes public outreach and education to help Oregonians learn strategies to save money, invest for college and make smart financial choices. You can track Treasury-related news on Twitter at @OregonTreasury.