Texas State Board of Education approved the recommendation of its finance committee to commit a total of $225 million to three real estate managers from the $30.2 billion Texas Permanent School Fund, Austin.
Commitments of $75 million each were made to follow-on funds from existing real estate managers: Ares Management's Ares U.S. Real Estate Fund VIII and Invesco Advisers' Invesco Mortgage Recovery Fund II, according to a webcast of Friday's SBOE meeting.
An additional $75 million was committed to Carlyle Group's Carlyle Realty Partners VII. The commitment is the Permanent School Fund's first to a Carlyle real estate fund; the fund is an investor in Carlyle private equity funds.
Courtland Partners, the fund's real estate consultant, assisted.
Both the Committee on School Finance/Permanent Fund and the full board accepted the recommendation of PSF's general consultant, NEPC, in approving contract extensions for the fund's three hedge funds-of funds managers, Blackstone Alternative Asset Management, Grosvenor Capital Management and Mesirow Advanced Strategies. Contracts for each firm expire Aug. 31.
As of May 31, the three funds-of-funds managers split management of hedge fund portfolio: BAAM managed a total of $1.3 billion; Grosvenor, $1.4 billion; and Mesirow, $383 million.
Holland Timmins, PSF's executive administrator and chief investment officer, expressed the staff's recommendation to immediately terminate Mesirow in order to save $4.5 million in fees.
The finance committee bypassed Mr. Timmins' recommendation and approved two-year contract extensions for all three managers at its Thursday meeting. However, the full board approved an amended motion to extend Mesirow's contract for 18 months at its Friday meeting.
Separately, the board approved a new target asset allocation for PSF that decreases equities and increases fixed income and alternative asset classes:
- U.S. large-cap equity down to 16% from 18%;
- U.S. smidcap equities down to 5% from 7%;
- International and emerging markets large-cap equities down to 16% from 18%;
- Emerging markets debt up to 7% from 5%; and
- Private equity up to 10% from 6%.
Allocations to the following asset classes remained unchanged: 12% core bonds, 10% hedge funds, 8% real estate, 7% risk parity, 6% real return and 3% emerging markets equities.
