Texas Teachers eyes PE portfolio sale that could reach $3 bln

By Chris Witkowsky and Rod James

Teacher Retirement System of Texas is shopping a portfolio of private equity stakes that could be as large as $3 billion, depending on what sells, three sources told Buyouts

The system’s portfolio is one of the larger sales on the market that has seen increasingly bigger deals. Earlier this year, Japan’s Norinchukin Bank marketed a portfolio valued at around $5 billion, Buyouts previously reported. Ardian emerged as the buyer on the process. 

Texas Teachers’s portfolio includes large commitments to funds, one of the sources said. The sale would be used for portfolio management, the source said. A buyer on the secondary market said the portfolio may not sell up to $3 billion. More likely, a sale would be somewhere over $1 billion, the buyer said.

Greenhill Cogent is working as secondary adviser on the deal. A spokesman with Texas Teachers declined to comment. 

Texas Teachers has been slightly over its long-term target to private equity, which could be why the system is motivated to sell down the portfolio. 

The system has been weighing changes to its asset allocation to try and boost its 7 percent expected investment return to 7.15 percent, 7.25 percent or 7.35 percent, Buyouts reported in May. 

To boost performance, Texas Teachers would likely have to add assets to private markets. The system is considering adding 1 percent or 2 percent to private equity as part of the contemplated changes. 

LP portfolio sales continue to lead deal activity in the secondary market, though GP-led deals like fund restructurings are taking an increasing amount of market share. LP portfolio sales represented 56 percent of total deal volume, which came in around $42 billion in the first half, Evercore reported earlier this year. 

Action Item: Check out Texas Teachers recent board book: https://bit.ly/2C9l6VI