The $151 billion Texas Teacher Retirement System, Austin, is expanding its emerging managers program with a total infusion of $3 billion over the next three to five years.
The existing TRS program has invested or committed a total of $3.7 billion in 158 emerging managers since 2005, about half of which were women- and minority-owned firms, a news release Monday said.
The expansion of the fund's program, called Emerging Manager Version 3.0, will start in fall 2018 with two new components, according to the release.
The EM Select program will invest or commit a total of $1 billion directly with certain managers in the program. The additional allocation of $50 million to $100 million for each selected manager will help to move them to full trust status but at a lower level than typically required for "graduation" from the emerging managers program, said Sylvia Bell, chief operating officer-investments, senior managing director and head of the emerging managers program, in a webcast of a Feb. 15 board meeting.
Emerging managers initially are allocated $10 million to $20 million with follow-on allocations between $20 million and $50 million. Graduation to full trust status usually entails an allocation of $150 million to $250 million, said Carolyn Perez, a fund spokeswoman, in an email.
The impetus for the new program enables TRS to "continue relationships with top-decile managers" that don't want or aren't ready to graduate to full manager status, Ms. Bell said on the webcast.
Grosvenor Capital Management will assist the TRS emerging manager investment team in making the direct investments to the EM Select program, board meeting documents showed.
The second program – EM Innovation – will distribute a total of $2 billion to money managers early in a firm's lifecycle through seeding investments, joint ventures and anchor investing, said Ms. Bell on the webcast. She also noted that the fund generally has not invested in managers at such early stages of development.
TRS investment staff will retain investment discretion over customized separate account assets of EM Select managers which will be run by Grosvenor Capital Management and Rock Creek Group on their investment platforms, board meeting documents showed.
Currently, assets of private equity and real assets managers in TRS' existing emerging manager program are run in separate accounts by Grosvenor on its investment platform, while Rock Creek oversees hedge fund and long-only manager separate accounts. Investment staffers of the fund have discretion over manager selection in these accounts, Ms. Perez said.
The net asset value of investment and commitment to existing emerging managers was $1.7 billion as of Feb. 1.
"It has been extremely rewarding to watch the program become an industry leader in the emerging manager space, while providing solid investment returns for the members of TRS," said Jerry Albright, chief investment officer, in the news release.