Oregon gets fee break in $500m FoF commitment

The pension negotiated fee reductions with Fisher Lynch before agreeing to commit $500m, using its Private Partnership Investment Principles.

The Oregon Investment Council (OIC) has wrung concessions out of another private equity firm – Fisher Lynch Capital – in exchange for a $500 million commitment.

Oregon approved a $500 million commitment to Fisher Lynch Capital Co-Investment Partnership II, which is targeting $1 billion from only two LPs, Oregon and the Washington State Investment Board.

The council, which oversees a $65 billion fund, started negotiating with Fisher Lynch in May on several aspects of the fund’s terms and conditions, and managed to get Fisher Lynch to set management fees so the fees “are not a big profit center”, a spokesperson for the pension said.

Oregon declined to disclose the amount of the fees. Fisher Lynch did not return a call for comment.

The pension created a list of “LP friendly” principles earlier this year it follows when considering a new investment. The principles include things like lower management fees, avoid charging transaction, monitoring and other deal fees and taking carry only after 100 percent of all capital is returned to investors.

Fisher Lynch was the first private equity firm for which Oregon used the principles while considering making an investment. At first, Fisher Lynch declined to engage in discussion about changes to its fee structure, but “cooler heads prevailed”, Ron Schmitz, OIC’s chief investment officer, told PEO’s sister magazine Private Equity International.

Fisher Lynch is a private equity fund of funds based in Boston and San Mateo, California. The firm invests in buyout and venture capital funds and sponsored co-investments. Fisher Lynch is led by Brett Fisher, a former senior vice president at the Government of Singapore Investment Corporation, and Linda Lynch, former director of private equity at Lucent Asset Management, the investment arm of Lucent Technologies.

The firm’s first co-investment fund raised $525 million from Washington State and Oregon.

Oregon has used the principles to change certain terms from another private equity firm recently, Lone Star. Oregon invested $400 million between two Lone Star funds and tentatively committed another $400 million depending on the early performance of the fund.

The pension invested $300 million to Lone Star Real Estate Fund II and $100 million to Lone Star Fund VII after the Texas-based firm altered its fee structure and governance. Specific details about the changes were not disclosed by Oregon or Lone Star.