Railpen joins with US, Kuwait investors in $700m private equity JV
RPMI Railpen has joined public sector funds in Alaska and Kuwait to create a new alternatives investment management company.
The three investors – including the $66bn (€53.6bn) Alaska Permanent Fund and the Public Institution for Social Security (PIFSS) of Kuwait – have committed an initial $700m to Capital Constellation, according to a joint press statement. The company will invest in “next generation private equity and alternatives managers” and plans to deploy more than $1.5bn in the next five years.
Capital Constellation will be advised by Wafra, a $20bn investment company owned by PIFSS.
Paul Bishop, Railpen investment director and a board member of Constellation, said the new joint venture offered “unmatched access to the next generation of successful alternatives managers, and will be a source of long-term returns that will help us achieve our mission to pay members’ pensions securely, affordably and sustainably”.
“We think the historical outperformance of first-time funds is meaningful, as is the participation Constellation receives in [general partner] economics,” Bishop added.
Julian Cripps, managing director of RPMI Railpen, said the deal demonstrated that the pension fund was “not afraid to think innovatively and act boldly”.
Constellation will provide initial fundraising support for new managers in alternative asset classes such as private equity and real estate. It will also provide “strategic and operational support” for new firms as they look to raise capital from other investors.
It has already agreed its first investment of $100m into Astra Capital Management, a US-based private equity firm specialising in technology investments.
Daniel Adamson, managing director of Wafra and president of Constellation, said the new venture had already begun working with Astra’s leadership team and described it as “a firm with the talent to ascend to great heights”.
RPMI Railpen, the £25.5bn (€30bn) industry scheme for UK railways, had £2.4bn allocated to private equity at the end of 2016 via its legacy pooled fund. Railpen has been shifting its investment structure from asset class ‘silos’ to growth and income pools for the last few years. New private equity investments – including the Constellation investments – are held in its illiquid growth fund.
PIFSS runs Kuwait’s social security funds, including pensions, sick pay and disability pay. Alaska Permanent was one of the world’s first sovereign wealth funds when it was formed in 1977, and invests the US state’s oil revenue.