Texas Permanent School Fund, Austin, has disclosed the hiring of bank loan and fixed-income managers to run a total of about $10.1 billion and commitments of $470 million to four private equity managers.
The $52.3 billion endowment’s investment staff with the assistance of investment consultant NEPC hired Loomis Sayles & Co. and Wellington Management to run $3 billion each in active core-plus fixed-income strategies, Mellon Investments to run $1.5 billion in a passive fixed-income strategy, Wellington to run a $1.1 billion cash management portfolio and Morgan Stanley Investment Management, Blackstone and PineBridge Investments to run $700 million, $500 million and $300 million, respectively, in bank loan portfolios, according to a webcast of its board’s April 11 meeting.
The hirings were completed between March 26 and April 2 as part of the implementation of asset allocation changes previously approved by the board at its Feb. 1 meeting. The fixed-income hirings are the result of staff’s decision to move to external managers from internally managed fixed-income portfolios.
Bank loans is a new asset class for the endowment with a target of 4%. Other target changes were the creation of an 8% target to private credit and 2% target to cash, increasing targets to private equity to 20% from 16%, infrastructure to 5% from 4%, natural resources to 5% from 3%, reducing targets to domestic large-cap equities to 14% from 15%, core fixed income to 10% from 11%, international equities to 7% from 14%, absolute return/hedge funds to 3% from 6% and high yield to 2% from 3%, and the elimination of targets of 2% each to commodities, emerging markets debt, emerging markets equities and long Treasuries.
Targets that remain unchanged are 12% real estate, 6% domestic small-cap equities and 2% Treasury inflation-protected securities.
Among the changes was the termination of BlackRock from an international equity portfolio that had $7.5 billion in assets and an emerging markets equity separate account called the Navarro 1 fund that had $1 billion in assets. In a March 20 email, Robert Borden, CEO/CIO of the Texas Permanent School Fund, cited the asset allocation changes as the reason for the terminations, but Tom Maynard, chairman of the board, said the terminations were the result of the Texas Comptroller Glenn Hegar in August 2022 including BlackRock on a list of 10 financial companies he determined “boycott energy companies” as a result of an anti-ESG law.
According to the webcast of the April 11 meeting, the commodities portfolio was internally managed and its assets sold, and the emerging markets debt managers — unnamed in the webcast — have already been terminated.
Also at the April 11 meeting, staff disclosed a total of $470 million in private equity commitments to undisclosed funds managed by Alvarez & Marsal Capital, KKR & Co., Shamrock Capital and Tribeca Venture Partners. The staff also expects to fund commitments totaling $2 billion to two “well-known” private credit managers before the end of May.
A school fund spokesperson had already disclosed the hiring of Dimensional Fund Advisors and Intech to run $2.5 billion and $1.5 billion, respectively, in active quantitative international equity strategies funded by the termination of BlackRock.
