Oregon invests quarter billion in Asian fund

Oregon Investment Council looks to Asia for new opportunities to benefit Oregonians
— Pending successful negotiations over fees, Oregon to commit $225 million to KKR Asian Fund II
By Oregon State Treasurer

To achieve strong returns to benefit Oregonians, the state invests in business opportunities around the planet – from Brazil to Europe to Asia — in addition to the state’s substantial commitments to Oregon ventures.

The Oregon Investment Council authorized a major new investment in Asia, committing $225 million to the KKR Asian Fund II. Oregon was an investor in the first Asia fund operated by KKR, which has posted net returns of 19 percent.

The commitment was endorsed unanimously by the five-member council, following detailed discussion with fund principals, state investment staff, and an independent consultant retained by the council to give a second opinion. The investment will be $200 million from the Oregon Public Employee Retirement Fund (OPERF), and $25 million from the Oregon Common School Fund.

“The Oregon Investment Council is looking for the best opportunities for Oregon, no matter where they are, to benefit Oregonians,” said Keith Larson, council chairman.

Oregon’s public pension fund had a value of $58.4 billion as of April 30.

Oregon’s financial future is determined in part by the success of Oregon’s investments. With strong investment returns, there is a reduced need for taxes or fees to meet public contracts and provide government services.

Private equity investments have been the most profitable sector in Oregon’s investment portfolio, and those date back to the state’s first private equity commitment – to Kohlberg Kravis Roberts & Co. – in 1981.

The new investment will be contingent on the successful final negotiation of fees and other terms, taking into account Oregon’s principles for private equity and real estate investments. Those principles were approved by the council in 2009.

The fund will focus on consumer goods, manufacturing, healthcare, and infrastructure projects, in both emerging and developed markets. KKR has six Asian offices and is opening a seventh this year, in Singapore.

As part of the due diligence as a major investor, Oregon sent a representative in Asia to inspect holdings, to meet with principals, and to discuss the firm’s growth plans.

The new commitment will help to further diversify the real estate holdings in the OPERF portfolio. Oregon’s portfolio is diversified, which means the state does not put all of its investment eggs in a single basket. That is a strategy that reduces the risk of losses and protects the portfolio over time.

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.

Disclaimer: Articles featured on Oregon Report are the creation, responsibility and opinion of the authoring individual or organization which is featured at the top of every article.