Texas Employees Retirement System, Austin, likely will search for international large-cap equity managers to populate its pool of approved managers at the start of the fund's 2020 fiscal year, which begins Sept. 1.
Investment officers of the $26.9 billion fund periodically review the structure and managers of its externally managed global equity portfolios and refresh the pool of pre-approved managers, ERS spokeswoman Mary Jane Wardlow confirmed in an email.
The large-cap international equity portfolio totals about $4.5 billion, or about 38% of the fund's global equity portfolio and 16% of the overall fund. About 63% of the portfolio is managed internally with external managers running the balance of the portfolio, Ms. Wardlow said.
About 78% of the portfolio now is managed in international developed markets with the rest in emerging markets.
Ms. Wardlow said investment staff on the fund's global equity team have not determined whether the search will include both developed and emerging markets. She also said staff may issue an RFP for the search but are "looking at other alternatives."
The current managers in ERS' externally managed international large-cap equity portfolio and the amounts they manage include:
- Acadian Asset Management, $171 million.
- BlackRock, $376 million.
- Fisher Investments, $344 million.
- Lazard Asset Management, $396 million.
- Franklin Templeton Institutional, $355 million.
ERS investment staff recently completed an overhaul of the fund's select pool of international small-cap equity managers, following a search that began in October 2017.
A total of 10 managers were selected to manage the externally managed portion of the fund's $600 million international small-cap equity pool.
The following managers received an allocation of $80 million each for investment in international small-cap equity directly from ERS:
- Axiom Investors.
- EAM Investors.
- Kayne Anderson Rudnick Investment Management.
- Global Alpha Capital Management.
Quantitative Management Associates received a direct investment of $80 million for emerging markets small-cap equity.
Algert Global, Ativo Capital Management, Copper Rock Capital Partners, Strategic Global Advisors and TimesSquare Capital Management also were added to the pool but ERS has not yet directly funded their mandates.
ERS has also invested in the following international small-cap equity managers through emerging manager-of-managers specialist Legato Capital Management: Algert Global, $32 million; Ativo Capital Management, $38 million; and Cedar Street Asset Management, $24 million.
Through Legato, ERS invested $41 million in an international SMID equity strategy managed by Kabouter Management. An additional $50 million was invested in an international small-cap equity strategy managed by Global Alpha Capital Management through Legato, Ms. Wardlow said in her email.
Previously, ERS did not have a dedicated, direct allocation to international small-cap equity and has only had its exposure to the asset class since February 2017 via the Legato portfolio.
ERS investment staff reported commitments totaling $74 million made to alternative investments in February, a transaction report showed.
Existing manager Northern Fund Management America received a $50 million commitment to Northern Shipping Fund IV, which will provide private equity and mezzanine debt financing to the shipping and energy sectors. ERS committed $45 million to the previous fund in Northern Fund Management's series in December 2016.
In private equity, €10 million ($11 million) was committed to Triton Debt Opportunities Fund II, managed by existing private equity manager Triton Partners.
ERS committed $13 million to CO20190207, a private equity co-investment. As a matter of policy, the pension fund does not identify managers of its co-investments.