Texas Employees Retirement System, Austin, approved a tactical investment plan for fiscal year 2017 to commit $750 million total to between six and 10 private equity funds, including co-investments, for its $2.5 billion private equity portfolio.
As of June 30, ERS had committed a total of $744 million to new private equity strategies this fiscal year, meeting materials for the board's Aug. 16 meeting showed.
All of the $24.7 billion pension fund's commitments to private equity funds (excluding co-investments) in the coming fiscal year starting Sept. 1 will be to buyout managers, said Wesley Gipson, director of private equity, in a video of the board meeting.
The commitments are part of the investment staff's continued efforts to rebuild its buyout portfolio. Mr. Gipson said a sale earlier in the current fiscal year of buyout fund stakes on the secondary market earlier in the current fiscal year netted about $1 billion.
The secondary sale decreased the size of the overall private equity portfolio down to about 10.3% from its 11% target. It also brought buyout investments and commitments down to 45.4% of the private equity portfolio — the low end of its target range — from the target allocation of 56.5%, Mr. Gipson's presentation showed.
Separately, the fund's June 30 annualized returns lagged those of its benchmark during short time periods, but met or exceeded the benchmark returns over the long term.
Year-to-date through June 30, the fund returned 1.7%, compared to 2.8% for the benchmark. For the first nine months of the fiscal year, the fund's return was 2.2%, while the benchmark return was 3.7%.
As of June 30, the fund's one-year return was -0.1% vs. 1.4% for the benchmark. The fund's return matched that of the benchmark for the three-year period at 6.2% and also for the five-year span at 6.1%. The fund's 10-year return was 5.7%, compared to 5.3% for the benchmark.