May 08, 2015
It’s instructive to see who private equity firm Riverside Partners recruited to invest in its Riverside Partners Fund III (raised in 2006), Fund IV (2009), and Fund V (2012).
Fund III had no public pension or union pension funds as limited partner (LP) investors. It had the Ford Foundation, Kauffman Foundation, Yale Endowment, MIT—elite, sophisticated investors.
Only Kauffman and Yale re-upped for Riverside Partners Fund IV, however. So Riverside Partners had to look elsewhere for investors. The PE firm recruited 6 public pension funds, including CalPERS (the large California Public Employees’ pension fund) and the Illinois State Board of Investment, plus two corporate pension funds and one union pension fund as LPs for Riverside Partners Fund IV. Nine out of the 15 investors in Riverside Partners Fund IV are pension funds. According to PitchBook, Riverside Partners IV is not performing very well. It is below the median for funds of its type, placing it in the third quartile.
With that record of performance, recruiting LPs for its most recent 2012 fund must have taken some ingenuity on Riverside Partners’ part. Sophisticated investors who had invested in the PE firm’s earlier funds (Kauffman, Ford, Yale, and MIT as well as CalPERS) did not invest in Riverside Partners Fund V. Instead we see that 13 of the 16 LPs that invested in Riverside Partners V Fund are pension funds: five are public employee pension funds, seven are union pension funds, and one is a corporate pension fund. They include the Illinois State Board of Investments which re-upped despite its poor experience in the previous fund. They also include the Machinists and a raft of smaller pension funds, including Arkansas Teachers, Houston Police, New England Carpenters, Ohio Carpenters, New York State Teamsters and others. Riverside Partners V fund is losing money according to PitchBook, and is in the very bottom quartile of funds in its class.