Pennsylvania PSERS: Hg Capital & Lindsay Goldberg PE Investments

Pennsylvania PSERS Boosts Private Equity Investments with New Commitments

Harrisburg, PA – The Pennsylvania Public School Employees’ Retirement System (PSERS) is strategically increasing its investments in private equity, approving significant commitments during their June trustees meeting. This move aims to bolster their long-term asset allocation strategy, focusing on diverse sectors and geographies.

Acting on the recommendations of investment consultant Aksia,PSERS is projecting annual commitments ranging from $1.4 billion to $2 billion by 2026 to effectively meet the system’s target exposure in private equity. For the current year, 2025, a more conservative commitment range of $700 million to $1 billion is proposed to align with its scaling long-term pacing model.

Strategic Allocations to Hg Capital

The trustees greenlit three allocations to Hg Capital, totaling approximately $245 million. These include:

• $100 Million To Hg Saturn 4
• €75 Million (Approximately $87 Million) To Hg Genesis 11
• €50 Million (About $58 Million) To Hg Mercury 5

All three funds are strategically focused on European enterprise software and services but differentiated by market capitalization.Mercury targets the lower-mid market (enterprise values under €1 billion),Genesis focuses on the mid-market (under €2 billion),and Saturn concentrates on the upper-mid market (over $1.5 billion). This tiered approach allows for diversified exposure within the technology sector.

investment in Lindsay Goldberg VI

Beyond the Hg Capital allocations, PSERS committed $100 million to Lindsay Goldberg VI, a fund aiming for $4 billion in total capital. Lindsay Goldberg’s strategy zeroes in on companies within the industrials, services, and healthcare sectors. The fund’s geographic focus spans North America and Western Europe, providing a balanced international approach.

Did You Know? Private equity firms often seek to improve the operational efficiency and profitability of the companies they invest in, driving value creation.

PSERS’s private Equity Portfolio Overview

PSERS,managing a significant $75 billion in total assets,has set a 12% target allocation to private equity.Current reports indicate that the system’s private equity exposure is at 16%. The portfolio demonstrated solid performance in 2024, delivering a 5.17% return. This performance underscores the significance of private equity in the system’s overall investment strategy.

Private Equity Commitments: A closer Look

The recent commitments by PSERS highlight a strategic effort to optimize its portfolio and achieve its long-term financial objectives. By diversifying investments across different sectors and geographic regions, PSERS aims to mitigate risk and enhance returns for its beneficiaries.

How do you think these private equity investments will impact Pennsylvania’s public school employees in the long term? What other sectors should PSERS consider for future investments?

PSERS Private Equity Commitments

Fund	Commitment Amount	Target Sector/Region
Hg Saturn 4	$100 Million	European Enterprise Software (Upper-mid Market)
Hg Genesis 11	€75 million (~$87 Million)	European Enterprise Software (Mid-Market)
Hg Mercury 5	€50 Million (~$58 million)	European Enterprise Software (Lower-Mid Market)
Lindsay Goldberg VI	$100 Million	Industrials, Services, Healthcare (North America & Western Europe)

The Role of Private Equity in Pension Funds

Private equity investments have become an increasingly crucial component of pension fund strategies worldwide. Pension funds, like PSERS, allocate capital to private equity to achieve higher returns compared to conventional investments such as stocks and bonds. These investments often involve acquiring stakes in private companies with the goal of increasing their value through operational improvements and strategic initiatives.

Though, private equity investments come with their own set of challenges. They are typically illiquid, meaning they cannot be easily converted to cash. Also,they require specialized expertise to manage effectively. Despite these challenges, the potential for higher returns makes private equity an attractive option for pension funds striving to meet their long-term obligations.

Frequently Asked Questions about Private Equity Investments

What is private equity?

Private Equity is an investment strategy involving investments in companies not listed on public stock exchanges,aiming for substantial growth and returns.

Why do pension funds invest in private equity?

Pension funds allocate to Private Equity seeking higher returns that can outperform traditional investments,helping them meet future obligations.

What are the risks of investing in private equity?

risks include illiquidity, meaning investments cannot be easily sold, and the need for specialized expertise in managing these complex assets.

How does PSERS choose its private equity investments?

PSERS relies on recommendations from investment consultants like Aksia and conducts thorough due diligence to select promising opportunities in Private Equity.

What sectors are typically targeted in private equity investments?

Common sectors include technology, healthcare, industrials, and services, often focusing on companies with high growth potential.

How does market capitalization affect private equity investments?

Market Capitalization is a key factor, influencing the focus of private equity funds; some target lower-mid market, while others concentrate on mid or upper-mid market companies.

What returns can be expected from private equity investments?

Returns vary,but private equity generally aims to deliver higher returns than public equities,albeit with higher risk and longer investment horizons.

What are your thoughts on PSERS’s expanded private equity strategy? Share this article and leave a comment below!

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PSERS and the Rise of Private Equity

The Pennsylvania Public School Employees’ Retirement System (PSERS), one of the largest public pension funds in the United States, has substantially increased its allocation to private equity (PE) in recent years. This strategy aims to enhance returns and diversify the portfolio beyond conventional stocks and bonds. Key players in this PE expansion for PSERS include firms like Hg Capital and Lindsay Goldberg.

Hg Capital Investments: Focus and Performance

Hg Capital, a leading specialist private equity firm focused on the software and services sector in Europe and North America, has received substantial commitments from PSERS. These investments typically target mid-market companies with strong growth potential. Understanding the specifics of these allocations is crucial for evaluating PSERS’ overall investment strategy.

PSERS’ investments with Hg Capital are generally made through fund commitments,meaning PSERS pledges a certain amount of capital to an Hg Capital fund,which is then deployed over several years. Performance data for these funds is not always publicly available, but reports indicate a focus on long-term value creation through operational improvements and strategic acquisitions.

Hg Capital Fund	PSERS Commitment (Approx.)	Investment Focus
Hg Capital 8	$200 Million	Software & Technology Services
Hg Capital 9	$250 Million	Software & technology Services
Hg Capital 10	$300 Million	Software & Technology Services

Lindsay Goldberg Investments: Diversified Approach

Lindsay Goldberg,another prominent private equity firm, offers a more diversified investment approach compared to Hg capital’s sector specialization. PSERS has allocated capital to Lindsay Goldberg funds targeting a broader range of industries, including industrials, business services, and consumer products. This diversification is intended to mitigate risk and capture opportunities across different economic cycles.

Lindsay Goldberg’s investment strategy often involves partnering with strong management teams to build and scale businesses. PSERS’ involvement provides Lindsay Goldberg with important capital to pursue larger transactions and accelerate growth. Like Hg Capital, performance data is often limited to PSERS members and stakeholders.

Risks Associated with PSERS’ PE Investments

While private equity offers the potential for higher returns, it also carries inherent risks. These include:

• Illiquidity: PE investments are illiquid, meaning they cannot be easily sold. This can be a concern if PSERS needs to raise cash quickly.
• Valuation Challenges: Determining the fair value of private companies is complex and subjective.
• Market Risk: PE investments are susceptible to broader economic downturns and industry-specific challenges.
• Leverage: Many PE firms utilize leverage