Searches and Hires

Texas Permanent allocates to Asian real estate fund, renews Neuberger strategic partnership

Texas Permanent School Fund, Austin, made a commitment to a new Asian real estate fund run by an existing manager, granted investment discretion to its real estate team for core and non-core real estate strategies, and earmarked $850 million for commitment to the asset class in 2019 among other actions.

The Texas State Board of Education, which oversees investment of the $33.2 billion endowment fund, accepted the investment and policy recommendations of the finance committee during a board meeting Friday.

A commitment of up to $75 million was approved for GreenOak Asia III, managed by GreenOak Real Estate, by the board's finance committee at a meeting Thursday.

PSF previously committed $50 million to the earlier fund in GreenOak's family, which focuses on real estate investments in Japan as well as in South Korea and other pan-Asian countries.

Also approved was the adoption of a change in governance for the real estate portfolio, which currently totals $2.8 billion, giving internal staff investment discretion to commit up to $175 million per commitment to core real estate strategies and up to $125 million per commitment to non-core funds without the approval of the finance committee and SBOE.

The fund's real estate investment consultant, StepStone Real Estate, also must approve investments recommended by staff.

Staff, with the support of StepStone, already had investment discretion for commitments to real estate co-investments and purchases of real estate stakes on the secondary market.

The committee also approved the real estate tactical investment plan, which aims to deploy $850 million to the asset class in 2019.

Separately, Neuberger Berman Group was rehired as a strategic partner and will continue to manage a specialized private equity portfolio and co-manage a core private equity portfolio jointly with PSF staff.

The contract is for three years with an optional three-year extension. An RFP was not issued for the mandate.

Neuberger Berman was initially hired in 2013 to run a total of $900 million and now manages $1.7 billion in the specialized private equity portfolio, said Holland Timmins, CIO of the permanent fund, in an email.

PSF had $3.1 billion invested or committed to private equity as of Aug. 31, the most recent date available.

Separately, Stone Harbor Investment Partners was terminated for management of a $686 million emerging markets debt strategy, a webcast of Thursday's finance committee showed. The SBOE approved the change on Friday.

Carlos Veintemillas, deputy chief investment officer, made the recommendation to terminate Stone Harbor because of poor performance of and the departure of a key portfolio manager, the webcast showed.

Stone Harbor, Ashmore Investment Management and Investec Asset Management were hired in July 2013 to manage $450 million each as part of the launch of PSF's emerging market debt portfolio. Ashmore now manages $805 million and Investec, $745 million.

"Stone Harbor regrets Texas Permanent School Fund's decision to terminate its mandate. The firm has deeply valued its relationship with Texas Permanent for the past five years, and hopes to work together again in the future," said a Stone Harbor spokeswoman in an email.

Mr. Veintemillas said during the webcast that PSF will reallocate assets redeemed from Stone Harbor to the other two managers. He did not say how much Ashmore and Investec will be given but noted that more will go to the manager with the lowest investment fees.

He added that PSF "is not getting the diversification benefit we expected from having three emerging market debt managers," and noted that Stone Harbor's termination will result in fee savings of $1.5 million, according to the webcast.

Separately, returns of the school fund for periods ended Dec. 31 were released, showing that the fund's return lagged its benchmark in the quarter and the year, but exceeded it over longer time periods.

The permanent fund's return for three months was -5.18% (benchmark, -4.96%); one year, -2.76% (-2.48%); three years, 7.13% (6.51%); five years, 4.97% (4.51%); and 10 years, 8.94% (8.43%).