Teacher Retirement System of Texas officials plan an all-out campaign to make the $132 billion pension fund more attractive to the world's choicest — and biggest — principal investment opportunities.
In fact, T. Britton Harris IV, chief investment officer of the Austin-based pension fund, told trustees on Feb. 11 it is among his staff's top five 2015 priorities to make TRS the “preferred destination for attractive large investments.” The investment staff's label for separate accounts and co-investments is principal investments.
As big as it is, Texas Teachers has been outflanked in recent years by much bigger sovereign wealth funds when trying to participate in large investment deals with firms in private equity, real assets, energy and a variety of other strategies.
Mr. Harris and Eric Lang, senior managing director of external private markets, described to trustees a newly competitive global landscape for principal investments.
“There are only a few funds in the world that can do investments of $150 million or even $100 million. We can do transactions way above that size, but there's a lot of competition for deal flow,” Mr. Harris said in a webcast of the board meeting where he and Mr. Lang presented the concept.
Deal size is critical to generate the kind of returns Texas Teachers' executives are looking for “in this low-rate environment,” Mr. Harris said on the webcast. “There are a lot of small co-investments out there that aren't going to move the needle for us,” he added, noting that typically, investment opportunities are well below the $50 million mark.