Lone Star State To Spend Less On PE In 2010

The Employees Retirement System of Texas intends to commit substantially less to private equity in fiscal 2010, and also plans to add venture capital to the mix.

The $22.3 billion pension fund plans on pledging $450 million to $750 million to private equity in its new fiscal year, which began on Sept. 1, Patrick O’Hara, the pension fund’s director of private equity, told Buyouts. The LP is looking to make between nine and 14 pledges altogether. In fiscal 2009, by comparison, the limited partner committed about $950 million to the asset class through 12 commitments.

The sub-sector mix is also changing a bit: Expect the pension fund to make five to eight pledges to buyout funds, three to six pledges to special situation funds, one to two pledges to distressed debt funds, up to two pledges to subordinated debt funds and up to three pledges to venture capital funds. Last year’s commitments went to buyout, growth equity, mezzanine, turnaround/restructuring and secondary funds.

The pension fund has an actual allocation of 0.6 percent in private equity, leaving it well below its 8 percent target for the asset class, said O’Hara. The long-term goal of the LP’s private equity program is to create a portfolio that’s well-diversified by geographic location of the underlying investments, with up to 35 percent of the portfolio in non-U.S. funds. Fiscal 2009 saw eight private equity pledges go to U.S.-based funds, another three to funds based in Europe and one to a fund domiciled in Asia.

Past commitments from the LP have gone to fund managers Advent International Corp., Brazos Private Equity Partners, Carlyle Group, Charterhouse Capital Partners LLP, CVC Capital Partners, New Mountain Capital LLC, TGF Management Corp. and Wind Point Partners.