US pension fund to cut Alchemy contributions

Alchemy Partners’ biggest investor is expected to scale down its commitment to the buy-out fund run by Jon Moulton, the outspoken pioneer of private equity in the UK.

The California State Teachers’ Retirement System (Calstrs), one of the biggest US pension funds, served notice last March that its rolling annual commitment to Alchemy was due to expire.

Efforts by Mr Moulton to secure fresh funding from Calstrs, including a visit to the US this year to meet representatives of the pension fund, have so far proved fruitless.

Calstrs is thought to have decided against renewing its commitment to Alchemy’s buy-out fund after the departure of Martin Bolland, one of the firm’s founding partners, at the end of last year.

The move comes as leading US institutional investors in private equity are seeking to whittle down their commitments to a smaller number of big buy-out groups.

“We’re in a continuous process of renewal,” said Mr Moulton, playing down the seriousness of the pension fund’s decision. “We are constantly renewing commitments from our investors and signing up new ones.”

He said that Calstrs accounted for a “high single digit” percentage of Alchemy’s assets under management.

However, he said much of this was a commitment to its Special Opportunities distressed debt fund, which was not in question.

Alchemy has an unusual system of collecting £400m ($794m) from investors on a rolling annual basis rather than through a series of 10-year funds, as most other buy-out groups do.

Investors must give at least 12 months notice if they decide against committing to the next year’s fundraising. The Alchemy chief said he had 70 “blue-chip investors” and the waiting list to join “considerably exceeds capacity”.

Mr Moulton, a former executive at Schroder Ventures – the precursor to Permira – and Apax Partners who set up Alchemy in 1997, is best known for his critical and often controversial commentary on his own industry.

He said in his keynote speech at last week’s Super Return conference in Munich that “the industry needs to prepare for bad news – there will be big private equity failures this year”.

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