Arkansas Teacher commits $35 million to Veritas, redeems from mortgage fund

The board of the $22.4 billion Arkansas Teacher Retirement System, at a Sept. 30 meeting, approved a commitment of up to $35 million to Veritas Capital Fund IX, a private equity buyout fund focused on investments in upper middle market to large companies in the aerospace, defense and government services sectors.

Veritas, a New York-based private equity firm which reports more than $40 billion in assets under management, is targeting $13 billion in commitments for Veritas Capital Fund IX, Michael Bacine, a managing director with ATRS’s private equity consultant, Franklin Park, told the board.

Veritas typically invests in “aerospace, defense, national security, healthcare, education and technology” companies, Bacine noted.

At the same meeting, the board voted to begin the multi-year process of redeeming the $40 million commitment Arkansas Teachers made 15 months ago to the Prophet Mortgage Servicing Opportunities fund, even as the fund’s investment consultant conceded the niche, opportunistic investment has paid off handsomely.

Even though that $40 million investment has grown to roughly $48 million, or 21%, over the roughly five quarters since inception, the consultant noted that the rising rate environment that served as a tailwind for Prophet’s mortgage servicing strategy when Arkansas Teacher committed to the fund last year is becoming a headwind as rates begin to decline.