Updated with correction.
CalSTRS is reducing the number of private equity firms it invests in, according to Seth Hall, co-director of the $139.2 billion fund's alternative investments.
“We continue to make new commitments, but we're highly selective,” Mr. Hall said Tuesday at the Superinvestor Conference in Paris. He said the goal of the California State Teachers' Retirement System, West Sacramento, “is to reduce the number of names.”
“There's no question that just because it's a name in our portfolio and it comes back to market, there's no such thing as an automatic re-up for us,” Mr. Hall said. “Even with our existing managers, the due diligence process is longer, deeper and I am sure, from the general partner's perspective, much more painful than it even was before. But that's the world we live in.”
Also, the $107.4 billion Texas Teacher Retirement System, Austin, is decreasing the number of relationships it has with private equity managers, partly because it is looking to invest more in each fund, said Allen MacDonell, senior director for private equity.
“We're looking to consolidate our relationships,” Mr. MacDonell said during the same conference. “We do have currently a minimum investment size of $200 million,” he said. “We're moving to consolidate relationships. That's been one on the biggest changes of the last three to five years.”
Mr. MacDonell said Texas Teachers used to do commitments as low as €15 million ($20 million) prior to 2007 before changing its policy “to make deals that move the meter.” The fund's allocation to private equity has increased to 12% from 7%, he said.
The proportion of North American public pension funds' assets invested in private equity rose to 6.4% from 5.1% in October 2008, mostly because of a bigger decline in the value of other assets during the financial crisis, according to Preqin. Pension plans lifted their long-term target for private equity holdings to a record 7.7% of assets as of December 2010 from 5.7% in October 2008, Preqin said.