Trustees of the $107.4 billion system authorized investment staff to set up funds-of-funds arrangements with both managers to manage up to $3 billion each, pending contract negotiations, according to a webcast of the board's meeting and an e-mail from Howard Goldman, a spokesman for the system.
During a presentation to the Texas Teacher board, Steven LeBlanc, a senior managing director, said the fund's private equity assets totaled 11.7% of plan assets and real assets were 12.2%.
The KKR and Apollo strategic partnerships are the fund's first such arrangements within its private markets portfolio, which includes private equity as well as real-return investments such as real estate, REITs, inflation-protected securities and energy-related investments.
The new private market partnerships follow a similar model the system set up with four money managers in 2008 for public market investments. In the three years since they were launched, the public markets partnerships produced “first-quartile investment results,” wrote Mr. Goldman. Texas Teachers funded a fifth public markets strategic partnership in July.
Earlier this year, investment staff unveiled a major restructuring of the fund's private equity and real assets portfolios.
By strategy, Mr. LeBlanc estimated that by the end of 2015, private equity will account for 12% of the total fund; real assets, 15.8%; energy, 2.2%; credit, 1.7%; and special opportunities, 0.9%.