Texas County & District Retirement off to sizzling commitment pace in 2014

  • $23.5 bln system committed $518 mln to PE, distressed debt through June
  • Increased allocation target from 10 to 12 pct last year
  • Retirement system committed $754 mln last year

The retirement system committed $518 million to private equity and distressed debt funds through the first half of the year, according to a recent disclosure on its website. That total marks a substantial increase from the $340 million it committed through the first six months of 2013. It also puts the $23.5 billion retirement system on pace to exceed last year’s total of $754 million.

The retirement system increased its target allocation to private equity, which includes venture capital and real assets, from 10 percent to 12 percent last year. In connection with the increase, it also increased its annual commitment budget from $700 million to $925 million.

Texas County & District Retirement System remains well below that 12 percent target. It registered a 7.7 percent allocation to private equity as of March 31, according to its website.

Even so, the retirement system’s frenetic commitment activity through the first half was more a function of sponsor activity than a “conscious change of pace,” spokeswoman Brooke Goggans said.

“We believe that we will get close to our 2014 target but it will be impacted ultimately by the size of allocations we receive,” Williams wrote, adding that the retirement system’s late year commitments may not “activate” until 2015, which would lead it to classify those commitments as 2015 vintages.

The retirement system has also increased its commitments to venture capital through the first six months of the year, allocating $140 million to funds managed by DFJ Venture, Khosla Venture, LC Capital and Lightspeed Venture Partners. Last year, Texas County & District Retirement System committed $60 million across two venture capital funds managed by Spark Capital and Technology Crossover Ventures.

“The pace of venture fundings this year are again largely a result of manager fundraising activity,” Williams wrote. “I think our activity level will slow a bit from the pace we’ve seen in the first half of the year.”

Although Texas County & District Retirement System includes its commitments from distressed debt funds within its private equity disclosures, it classifies those funds as having the characteristics of high-yield investments, to which it has a separate allocation.

The retirement system has a 13 percent target allocation to high-yield investments, which include bonds, opportunistic credit, direct lending and distressed debt funds.