Texas Employees sets tactical plans for alternative investments of $2.4 billion in FY2014

Texas Employees Retirement System, Austin, approved tactical investment plans for the 2014 fiscal year that would invest or commit a total of $2.4 billion to the private equity, hedge fund and infrastructure portfolios of the $24.2 billion pension fund.

At a board meeting on Tuesday, trustees approved a staff recommendation to commit a target of $700 million to between six and 10 private equity funds and co-investments in the fiscal year ending Aug. 31, 2014, confirmed Mary Jane Wardlow, an ERS spokeswoman, by e-mail. The private equity target allocation was raised to 10% of plan assets from 8% for the pension fund's 2014 fiscal year.

Texas ERS' private equity portfolio totaled a net $1.5 billion as of June 30.

ERS staffers intend to have fully reached the 5% target allocation to hedge funds by the end of the 2014 fiscal year. About $1.3 billion is slated to be invested in a range of hedge fund strategies during the 12-month period.

A combined allocation of $188 million is designated for investment in an event-driven hedge fund and a relative value strategy before the end of the 2013 fiscal year. Ms. Wardlow declined to name the funds. With the two new allocations, ERS' hedge fund portfolio will total about $670 million as of Sept. 1, according to board meeting materials.

Finally, investment officials have begun to create an infrastructure asset class with a 1% target allocation of plan assets that was approved by the board in February this year. Existing investments in three Texas power plants totaling $167 million were transferred from another portfolio into the new infrastructure bucket.

A commitment of $125 million to an emerging markets power fund Ms. Wardlow declined to identify is now in progress.

The infrastructure target commitment of $235 million for fiscal 2014 also was approved by ERS trustees.