BlackRock has managed the separate account for the $29 billion educational endowment since 2004. BlackRock’s new contract is effective Sept. 1, 2017, and cannot extend past Aug. 31, 2025, according to contract clauses.
A search was conducted because BlackRock’s contract had been extended as many times as it could be and the contract needed to be rebid, said B. Holland Timmins, executive administrator and chief investment officer, a webcast of the Committee on School Finance/Permanent School Fund at a meeting Thursday showed.
Northern Trust Asset Management also was a finalist for the allocation.
Also, from the $2.2 billion real estate portfolio, $75 million was committed to Ares U.S. Real Estate Fund IX. The fund committed $75 million in 2014 to the prior fund in Ares Management’s series. The value-added strategy seeks investments in underperforming real estate assets with a focus on multifamily in major U.S. markets, said John Grubenman, the fund’s director of private markets, during the finance committee meeting, according to the webcast.
The latest Ares fund is expected to have a net internal rate of return of between 10% and 12% over the life of the fund, Mr. Grubenman said.
The fund’s real estate team also committed $25 million between finance committee meetings to a co-investment fund focused on acquisition of senior housing properties, including assisted living and independent living facilities. Columbia Pacific Advisors, a new manager for the endowment, is managing the co-investment. The targeted net IRR for the co-investment is 20%, said Mr. Grubenman.
The recommendations of the finance committee were approved by the Texas State Board of Education during a meeting Friday. The board oversees investment of the Permanent School Fund.
Separately, annualized gross returns of the educational fund as of Dec. 31 were three months, 0.61% (benchmark, 0.56%); one year, 8.99% (7.79%); five years, 4.14% (3.6%); and 10 years, 5.07% (4.74%).