South Carolina avoids defaulting on capital call

The South Carolina Retirement System funded a capital call to Warburg Pincus Monday, just one day before the system would have defaulted on an approved private equity commitment.

The $26.6 billion retirement fund’s investment commission voted to approve the commitment of up to $50 million to Warburg Pincus in November, but state treasurer Curtis Loftis refused to sign the capital call until the investment commission produced additional legal documentation related to the terms of the investment. After filing a lawsuit against Loftis on Friday for not signing the capital call, senior officials from the investment commission supplied the necessary documents, leading Loftis to authorize a capital call of $11.7 million.

Loftis has since requested that the court dismiss the action as moot, according to legal documents. The treasurer was due to appear in court Tuesday morning. 

“The purpose of the document of Legal Sufficiency is to ensure that the terms, fees and conditions in the final investment agreement are the same as approved by the Investment Commission,” Loftis said in a statement. “The Retirement System should never pay more fees than it approved.”

Depending on the terms of the limited partner agreement, had South Carolina defaulted, Warburg Pincus may have been able to dilute the retirement system’s existing position in the fund and ask other limited partners to contribute the missing capital.

The dispute between Loftis and the investment commission is the most recent in a long feud between the treasurer and his fellow commissioners. In February, the commission voted to censure the treasurer for a series of critical public statements the treasurer made about the commission’s investment practices dating back to 2009. 

Among Loftis’ criticisms of the investment commission are claims that the retirement fund performs poorly relative to other state pensions, pays too much in fees and has a portfolio that is too complex.