TMRS adopts revised investment guidelines for private equity

Institution: Texas Municipal Retirement System
Headquarters: Austin, US
AUM: $34.5 billion
Allocation to alternatives: 31.6%

Texas Municipal Retirement System has embraced a revised investment policy, reported affiliate title Private Equity International. 

The objectives of the rebalancing policy are to maintain the board’s approved strategic allocation and its respective risk-return profile. Furthermore, the rebalancing strategy will be governed by allocation ranges rather than time periods.

The revised guidelines for private equity are as follows:

• The private equity portfolio structure will consist of 40-75 percent for control/buyout, 10-45 percent towards venture/growth/minority investments and 5-35 percent for special situations and opportunistic vehicles.
• The geographic allowance will consist of a maximum of 25 percent to international vehicles and a minimum of 75 percent to US-based funds.
• No more than 35 percent of the PE portfolio will be invested in a single investment vehicle, with the exception of funds of funds, secondary funds and funds of one established to buy secondaries.
• The investment must remain within 25 percent of the manager’s assets under management at the time of commitment.
• A commitment made on a primary basis must remain within 35 percent of the total net assets of the private equity portfolio.

Also in the September board meeting, the $34.5 billion pension fund approved more than $1.1 billion-worth of private equity commitments:

• $200 million to MTP Climate Infrastructure Fund
• $200 million to HarbourVest/TMRS Co-Invest Fund of One
• $125 million to Insight Partners XII
• $125 million to Providence Strategic Growth V (PSG V)
• $100 million to Reverence Capital Partners Credit Opportunities Fund V(PE Fund III)
• $80 million to Flagship Pioneering Fund VII
• $75 million to Lightbay Investment Partners II
• $75 million to Heartwood Partners IV
• $75 million to Ara Fund II
• $40 million to Techstars Accelerator 2021
• $40 million to Insight Partners XII Buyout Annex Fund

Currently, TMRS dedicates 31.6 percent of its portfolio to alternatives, of which private equity incorporates 4.47 percent. The target allocation is set at 10 percent for the asset class.

Illustrated below are the recent fund commitments, investment portfolio breakdown, PE portfolio structure and strategic allocation range for respective asset classes.

More information about the policy can be found here.

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