The Oregon Investment Council oversees the investment activities of the Oregon Public Employees Retirement Fund (OPERF). As one of the earliest pension funds to invest in private equity, OPERF has built a reputation for its pioneering and successful private equity program over the past 30 years. This article analyzes OPERF’s private equity investment strategy and sheds light on how it has navigated the private equity market as an experienced institutional investor.
OPERF adopted private equity early and built expertise in manager selection
OPERF made its first private equity commitment in 1981 and established a specialized private equity investment team in 1990. Such an early move enabled OPERF to develop extensive capabilities in picking top-quartile managers. According to a Cambridge Associates analysis, more than 75% of OPERF’s partnerships have outperformed peer medians over the last 10 years.
OPERF cultivated strong relationships with top-tier GPs like KKR and TPG
Oregon Investment Council has cultivated close relationships with blue-chip PE firms like KKR, TPG, Carlyle and Blackstone. The council’s reputation as a steady and knowledge partner has allowed it to gain access to top-tier funds and co-investment opportunities. OPERF was one of the earliest investors in KKR’s mega buyout funds and has continued investing in new KKR funds over decades.
OPERF increased allocation to PE steadily to capture excess returns
OPERF has progressively increased its PE allocation from 5% in 1990 to around 20% today, significantly above the average pension fund allocation of 10-15%. Such heavy PE exposure has enabled OPERF to benefit from the asset class’s high historical returns. The private equity portfolio returned an annualized 12.8% over the last 20 years compared to 7.9% for OPERF’s overall fund.
OPERF adopted innovative programs like direct investments and co-investments
OPERF has supplemented its fund investments with innovative programs like direct PE investments and co-investments since 1999 to boost net returns. Its co-investment program alone has returned an annualized 21% over the past decade. The pension fund has also set up a $4 billion direct PE program to take more control over deal sourcing and portfolio management.
OPERF’s pioneering private equity program, early adoption, strong GP relationships, and innovative co-investment strategies make it one of the most sophisticated institutional investors in private equity. Its success provides valuable lessons for other pension systems exploring private equity investments.