The $109 billion Teachers Retirement System of Texas said it plans to commit $1.5 billion in fresh capital to private equity through the end of the year, putting the giant pension on a track to spend a quarter billion dollars a month on the asset class, according to a presentation made to the board on June 16.
Additionally, the giant pension planned to add $7 billion in private equity commitments by 2015. The main aim of the increase in private equity—plus a similar move into “real assets” like timber, energy and farmland—is to increase the portfolio’s overall diversification, according to the presentation.
Texas Teachers had $16.9 billion in capital committed to private equity funds as of March, including $9.8 billion in invested capital, about 9 percent of overall assets. The pension’s target for private equity is 10 percent.
The pension fund has been one of the nation’s best-performing, with its 15.9 percent one-year return (through March) putting it near the top of its public pension fund peer group. Its private equity portfolio returned 22.5 percent over the same period, beating its target goal by 4.5 percent.
The pension is rather concentrated within its private equity portfolio, having committed one third of its total private equity assets to just five firms: Apollo Management, The Blackstone Group, The Carlyle Group, Credit Suisse and CVC.
Interestingly, the pension says it hopes to triple the amount that it commits to direct private investing to $5 billion by 2015. At present, Teachers has $1.5 billion in direct investments, including $600 million in private equity co-investments and $900 million in real estate co-investments.