The Minnesota State Board of Investment (SBI) voted this month to halt new investments in private equity firm KKR, pending a review of their investment in retailer Toys “R” Us.
The Toys ‘R’ Us bankruptcy is expected to cost thousands of employee jobs as the firm shutters.
KKR and Bain Capital took Toys R Us private in a debt-driven buyout in 2005.
Toys R Us has not fared well in recent years. And critics, led by New York’s populist-leaning Center for Popular Democracy, accused the huge equity-investment firms of making hundreds of millions in fees and divdidends on the failed retailer over the years.
Owners of Toys R Us, including the state pension fund, lost hundreds of millions on the bankruptcy.
Gov. Mark Dayton, chairman of the SBI, asked Executive Director Mansco Perry to look into the matter, saying he was concerned about private equity investments. Perry will report to the board at its next quarterly meeting.
About 10 percent of the $93 billion in pension and other funds managed by the SBI is in “private market vehicles,” including private equity, energy investments and real estate.
In 2017, SBI and its contracted investment managers provided an 18.3 percent return on investments, thanks partly to a buoyant stock market. Over the last 30 years, the SBI has provided a compounded annual return of 12 percent from private investments, 9.2 percent stocks and 6.4 percent from bonds.
The state board, which invests employee pension funds and other state money, has been one of the better performing state investment operations in the country.