Two pension funds and Kuwait’s social security fund have launched a $700 million seeding venture to invest in newly formed private equity and alternative investment managers.
Alaska Permanent Fund Corp., the United Kingdom’s RMPI Railpen and the Public Institution for Social Security of Kuwait are expected to increase their commitments to the venture to $1.5 billion, up from their initial $700 million, over five years. Their joint venture, dubbed Capital Constellation, is advised by Wafra, an alternative asset manager in New York. Combined, the three partners in Capital Constellation manage more than $200 billion.
Constellation has already committed $100 million to Astra Capital Management, a Washington, D.C., PE manager aiming to focus on growth buyouts in communications and technology services.
Constellation will invest both as limited partners to help jumpstart fundraising for its seeded managers and as general partners. As a general partner, Constellation will receive shares of revenue from the seeded managers and, potentially equity stakes in the firms. The venture will also provide strategic and operational support to its managers.
“We believe this innovative investment platform will be a key resource for investment managers as they launch and build the next generation of successful and enduring private equity, real estate and other alternative investment franchises,” says Russell Valdez, senior managing director of Wafra. Wafra manages $20 billion in alternative assets and commitments, including private equity.
Meshal Al-Othman, chief investment officer of the Kuwait social security fund, says combining forces in the joint venture will enable the partners to “find future stars in the investment space.”
Access to new alternative investment managers through their funds and as general partners is also attractive, says Paul Bishop, Railpen investment director. “We think the historical outperformance of first-time funds is meaningful, as is the participation Constellation receives in GP economics.”