Arkansas Teacher Retirement considers increasing PE commitments in 2015

  • Assets grew by some $2.4 billion last year
  • Pension budgeted $230 mln for PE in 2014
  • Has room for one more $30 mln commitment

Arkansas Teacher Retirement System assets grew by approximately $2.4 billion during the 2013 calendar year, according to a February press release, with its investment portfolio overall generating a 19.8 percent return.

The February announcement was preceded by its board of trustees’ approval of a 2014 private equity pacing schedule at its Dec. 2 meeting. The plan, which called for roughly $230 million in commitments for the 2014 calendar year, was designed to maintain the retirement system’s 10 percent allocation to the asset class.

The investment plan earmarked $105 million for small and mid-market buyout or turnaround funds, $50 million for distressed and debt-related strategies, and $75 million for funds managed by retirement system consultant Franklin Park.

In addition to its commitments to Franklin Park, Arkansas Teacher Retirement System has already committed to flagship funds managed by Castlelake, Sycamore Partners, and Thoma Bravo this year, leaving room for one more commitment of around $30 million, Hopkins said, adding: “I’m not going to turn down a good investment based on our pacing.”

Hopkins attributed the need for a possible increase to the strong performance of Arkansas Teacher Retirement’s equities portfolio. The $14.1 billion retirement system reduced its target allocation to domestic stocks to 20 percent last year from 25 percent. The target reduction facilitated the formation of a 15 percent real assets allocation, which includes investments in real estate, timber, farm land and infrastructure.

Arkansas Teacher Retirement System has allocated to several real asset and infrastructure funds this year, including to some managed by firms best known for their private equity strategies. On July 28, the retirement system approved a $50 million commitment to Kohlberg Kravis Roberts’ second infrastructure fund, Hopkins said. Arkansas committed up to $30 million to The Carlyle Group’s fourth Realty Partners Fund in April.

Arkansas Teacher Retirement System had a 9.3 percent allocation to private equity as of June 30, 2013 according to an annual report released in February. The portfolio generated a one year return of 12.5 percent as of the same date.

Photo of the Natural Bridge of Arkansas sign by Jacob Slaton for Reuters. All rights reserved.