Texas ERS may cut PE allocation by $100m

The $20bn US pension is also considering carving out a new allocation for debt investments.

The Employees’ Retirement System of Texas plans on spending around $500 million on private equity in fiscal 2011.

The $20 billion pension’s board, which authorised an 8 percent allocation to private equity in 2008, will consider approving the pension’s 2011 private equity plan Tuesday. The actual allocation range recommended in the plan is $375 million to $625 million. The pension works with Altius Advisors on its private equity programme.

Texas ERS’ pending target commitment for fiscal 2011 is $100 million less than fiscal 2010, due in part to the pension’s committing $200 million over target in fiscal 2009.

The pension also plans to create a new debt investment category to expand its exposure to subordinated, senior and distressed debt strategies. The debt category would have an allocation range of 0 percent to 15 percent, according to pension documents.

In turn, the pension is cutting its allocation range to special situations, which had previously included its debt investments, to 5 percent to 30 percent from 20 to 50 percent.

The pension also is expanding exposure to international managers, increasing the allocation from 35 percent to 40 percent, and has created a sub-category within venture capital called “growth equity”. To make room, the venture capital allocation range will increase to 10 to 30 percent from 5 percent to 20 percent.

Since launching its private equity programme, Texas ERS has committed $1.73 billion to 23 private equity funds run by managers including CVC, Charterhouse, The Riverside Company, Lexington Partners, Hellman & Friedman and Advent International.