Texas ERS to slow private equity commitment pace

  • New commitment pace calls for roughly $750 mln for PE
  • Texas ERS to expand co-investment program
  • Buyouts, re-ups to dominate pension’s FY 2017 activity

Employees Retirement System of Texas will commit around $750 million across as many as 10 private equity funds and co-investments in the fiscal year starting Sept. 1.

Texas ERS approved the PE pacing plan at its Aug. 16 board meeting, a video of the meeting on its website shows.

The $24.7 billion retirement system could commit as much as $940 million next year depending on market opportunities, which would be more in line with the $950 million commitment pace it set for its current fiscal year, according to pension documents. Texas ERS had filled around 80 percent of its allocation for FY 2016 as of June 30.

The reduced pace is likely a function of the retirement system’s asset allocation. Texas ERS was slightly above its 10 percent target allocation to the asset class as of June 30, pension documents show.

At least half its new commitments will go to traditional buyout funds and co-investments, with the rest allocated across venture capital, growth equity, debt-related and special-situations investments, pension documents say. Texas ERS and consultant Altius Associates expect a number of the pension’s existing general partners to return to market with follow-on funds in the next year.

The system will also look to build out its co-investment program, which includes stakes in 25 portfolio companies. Altius will help Texas ERS expand the portfolio to include deals sponsored by GPs with whom the pension has not invested before.

Texas ERS valued its PE portfolio at $2.5 billion at June 30, pension documents show. The portfolio delivered a 10.7 percent internal rate of return since inception.

Action Item: For more information about Texas ERS, visit www.ers.state.tx.us