The $21 billion Employees Retirement System of Texas is planning to allocate $1 billion to private equity investments this year as it works to meet its target allocation of 8 percent to the asset class.
The pension, which established policies for private equity investing in 2007, wants to spend $1 billion this year and $700 million for each of the next four years on private equity investments, for a total of $3.8 billion by 2013, according to documents from the pension’s board of trustees.
The actual allocation to private equity could fluctuate between a range of $750 million and $1.25 billion this year, according to pension documents, depending on opportunities in the market and the pension’s resources. The allocation range for the next four years is between $525 million and $875 million.
The pension's current allocation to private equity is under 1 percent, according to the Texas ERS web site. Texas ERS is working with Altius Associates on building the private equity portfolio.
During the next five years, Texas ERS is planning to make 15 venture capital commitments, 60 commitments to buyout funds and about 30 pledges to special situations, including three to subordinated debt funds and three to distressed debt.
One long-term goal of the fund, according to the pension, is to have a portfolio that is well-diversified by geographic location with no more than “35 percent of the portfolio being non-US”.
So far, Texas ERS is invested in two funds managed by venture firm Texas Growth Fund, and one each with The Carlyle Group, New Mountain Partners, Advent International and Brazos Private Equity Partners.
Since 30 September 2008, the pension has also committed $65 million to Wind Point Partners’ seventh fund, which was targeting $1 billion; €78.7 million to CVC European Equity Partners V, which closed on about €11 billion last year; and €53 million to Charterhouse Capital Partners IX, which is targeting €4 billion, down from its original target of €6 billion.
“It is expected that there will be a robust pipeline of high-quality opportunities that will be available in the coming 12 months,” the pension said in board documents. “As ERS will continue making new private equity commitments in 2009, the primary objective for the portfolio over the next 12 months is to develop the program through commitments to a balanced mix of high-quality investment opportunities that will be available over that period.”