Texas County & District bets on China-focused funds, venture

  • Assets Under Management: $29 bln
  • PE Allocation: 16 pct target
  • Actual Allocation: 13.1 pct
  • Whom to Contact: Executive Director Amy Bishop: 512-328-8889
  • Why This Is Important: US pension builds exposure to Asia funds

Texas County & District Retirement System has committed $357 million to seven private equity funds to date in 2018. Most of these are re-ups to existing managers.

TCDRS’s $3.8 billion private equity portfolio generated the highest returns over the one and three-year periods as of March 31, 2018. It returned 19.8 percent over one year, 14.5 percent over three years and 15.1 percent over five years.

TCDRS committed $85 million to Hillhouse Capital Management’s fourth fund, according to pension documents.

Hillhouse was founded in 2005 by Lei Zhang who worked at the Yale endowment under David Swensen. The company focuses on consumer, TMT, industrials and healthcare and invests in companies across all equity stages.

Yale was one of Zhang’s first backers and seeded $20 million in capital for Hillhouse. Hillhouse’s portfolio includes Tencent, Air BnB and Grab.

The Hillhouse fund is expected to be larger than KKR’s Asia fund that raised $9.3 billion in commitments last year, Financial Times reported.

Hillhouse is TCDRS’s most recent China-focused private equity investment. Since 2015, it has committed a total of $80 million to IDG Capital’s China venture funds three and four.

TCDRS also committed $70 million to Joy Capital’s first two funds. Joy Capital was founded by former Legend Capital Managing Director Liu Erhai in 2015. Some of its investments include NextEV, Tuhu and XiaoZhu.com.

TCDRS’s other commitments for 2017 were re-ups of $45 million to OrbiMed Advisors’ seventh fund, $100 million to The Jordan Co.’s fourth Resolute fund, $80 million to two Khosla Ventures funds, and $47 million to two Lightspeed Venture Partners funds.

The $29 billion TCDRS has a 13.1 percent actual allocation versus 16 percent target private equity allocation as of March 31, 2018.

The private equity portfolio targets 50 percent of its allocation to buyouts, 20 percent to venture capital, 10 percent to real assets like energy or other commodity-based investments, and the remaining to non-U.S. investments in buyout, venture or real assets, according to pension documents.

Cliffwater manages the investment manager searches and due diligence on potential investment managers for TCDRS.