Texas Employees Retirement System, Austin, plans to commit about $950 million (plus or minus 25%) to between six and 10 new private equity funds and co-investments in the fiscal year ending Aug. 31, 2016.
Trustees approved a new annual private equity tactical plan for the asset class at a board meeting Tuesday.
The $25.9 billion pension fund reached its 10% target allocation to private equity earlier in the current fiscal year; new fiscal year commitments are designed to maintain the target and will be focused on strategies including buyouts, turnaround/restructuring, growth equity, venture capital and energy, meeting materials showed. The geographic focus for the fiscal year will be on the U.S., Europe and Asia.
The pension fund's hedge fund program also met its 5% target allocation during this fiscal year. The 2016 tactical plan for hedge funds keeps the allocation at that target, but it directs investment staff to seek up to four new hedge fund investments as well as additions to existing managers without specifying a total dollar amount.
As many as two new hedge fund investments could be made from the directional growth portfolio in strategies such as long/short equity, event-driven, global macro and relative value. Meeting materials indicated the limit on allocations from the directional portfolio is $250 million. Texas ERS also uses hedge funds in its real estate and credit portfolios, and investment officers might add one new manager to the credit portfolio and will be reviewing possibilities for additional real estate funds.
Separately, trustees learned returns of the pension fund topped those of its benchmark in every time period ended June 30: three months, 1.1% (benchmark, 0.5%); one year, 3.9% (2.5%); three years, 10% (9.5%); five years, 10.1% (9.8%); and 10 years, 6.5% (6.1%). Returns for more than one year are annualized.