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Pennsylvania pension meeting gets heated over private equity diversity questions

Diversity has become a flashpoint for board members of many LPs, who believe they can steer managers into paying more than lip service to the topic.

The Pennsylvania State Employees’ Retirement System investment committee approved a $125 million commitment to Sentinel Capital Partners despite accusations the firm misled the pension on its diversity efforts.

Diversity has become a flashpoint for board members of many LPs, who believe they can steer managers into paying more than lip service to the topic.

The investment committee voted to approve a $100 million commitment to Sentinel Capital Partners VIII and $25 million to Sentinel Junior Capital II by a seven to three margin at its meeting held on 3 June. It is not clear how much those funds are targeting.

The vote came after accusations made by Dan Ocko, who attended the meeting on behalf of investment committee member State Representative Dan Frankel. Ocko said Sentinel Capital falsely stated it had a mentorship programme for women and minorities during correspondence with the investment committee. Buyouts watched a video webcast of the meeting.

That prompted the committee to press Sentinel Capital to resubmit its answer, Ocko said. In a response provided one day before the investment committee meeting, Sentinel Capital admitted it did not have a mentorship programme for women and minorities.

“I have concerns about trust issues. We submitted questions. They gave us answers that are not true,” Ocko said at the meeting.

Pennsylvania State Treasurer Stacy Garrity added during the meeting that Sentinel Capital had no Hispanic or African-American employees and that only two of its 11 junior employees were female. Garrity voted in favour of approving the commitments.

Alice Mann, a partner at Sentinel Capital who focuses on human capital, said the firm was “on a journey” in its commitment to hiring a diverse investing team and overall firm.

Mann, who started her position at the end of January, said she was not involved in preparing the original answer.

Sentinel Capital founder and managing partner David Lobel also said he did not review the original answer, as the task was delegated to the firm’s legal and administrative staff.

Sentinel Capital did not respond to questions seeking further comment.

Ocko also said at the meeting that the funds would charge a 25 percent carried interest rate. While this is not unheard of, it is above the conventional market rate of 20 percent.

In its presentation, Sentinel Capital said it focuses on lower-mid-market businesses and described itself as a leader in consumer goods, business services, healthcare services and industrials.

Update: This report was updated to clarify that Buyouts watched a video webcast of the meeting.