Texas Employees Retirement System, Austin, increased its target commitment to private infrastructure to $400 million for the fiscal year ending Aug. 31, up from an original target of $250 million.
Over the next five fiscal years, investment officials of the pension fund project infrastructure commitments to total $2.35 billion.
Trustees of the $28.5 billion pension fund accepted the recommendation of the staff to raise the commitment to infrastructure in fiscal year 2018 at a meeting Wednesday. The board approved a new asset allocation in August 2017 that raised the target investment in infrastructure to 7% from 4%, necessitating a more aggressive investment pace, ERS investment officers stressed in board meeting materials.
Trustees also approved a tactical plan earmarking $450 million for infrastructure in fiscal year 2019.
Pension fund officials expect to make between six and eight commitments per year to infrastructure funds and co-investments in 2018 and 2019.
Longer term, the investment staff estimates that the pension fund will reach its 7% target allocation to infrastructure by fiscal year-end 2023. The pacing plan projects annual commitments to the asset class of $500 million each in 2020, 2021 and 2022, meeting documents showed.
By fiscal year-end 2023, the ERS investment staff estimates that the market value of the defined benefit plan will total $36.6 billion and the net asset value of the private infrastructure portfolio will have reached $2.6 billion.
In the fiscal year ended Aug. 31, 2017, ERS committed a total of $343 million to six private infrastructure funds and co-investments.
As of Dec. 31, 2017, the pension fund's committed assets to infrastructure totaled $1 billion, according to meeting reports.
In other news from the board meeting, ERS' investment returns topped those of the pension fund's benchmark in every period ended Dec. 31: three months, 3.7% (benchmark, 3.4%); one year, 16.1% (14.9%); three years, 7.8% (7.6%); five years, 8.6% (8.4%); and 10 years, 5.8% (5.6%). Multiyear returns are annualized.
