The $118 billion Teacher Retirement System of Texas may commit between $2 billion and $3 billion to private equity funds in 2014 in order to maintain its targeted allocation, with incumbent sponsors expected to receive the bulk of the investments.
Rich Hall, managing director of private equity for TRS’s $13.4 billion private equity portfolio, said the retirement system for about 1.3 million active and retired teachers in the Lone Star state looks to keep its allocation at about 11 percent of the total trust.
“In terms of 2014 and the private equity space, my expectation is we’ll continue to deploy capital largely with our existing manager group,” Hall said in a phone and email interview with Buyouts. “ I expect that the amount we commit will be consistent with what we’ve been doing in recent years, between $2 billion to $3 billion a year. Assuming that the markets aren’t too volatile, that level of commitments is what is necessary for us to maintain the targeted allocation to private equity relative to the total trust.”
Overall, TRS has an internal target for buyout funds to represent roughly 70 percent of its private equity portfolio.
“Our plan is to invest roughly half of that 70 percent in the large buyout area – about 35 percent in the larger buyout funds – and 35 percent in smaller buyout funds,” Hall said. “That’s the target and we’ll be around that range [in 2014]. We have no strong preference between large and small funds.”
In the past year, the system committed $150 million to Insight Venture Partners Fund VIII, a first-time investment in the growth equity fund.
“Insight’s strategy is to invest in real companies that are making money and take them to the next level,” Hall said. “We’re excited about starting off a new relationship with these guys, and it’s a part of our portfolio that we do need to build out a little more.”
TRS also committed $1 billion to two Apollo Global Management funds: Apollo Investment Fund VIII, which drew $850 million, and Apollo Credit Opportunities Fund II, which drew $150 million.
TRS also committed $200 million to Blackstone Group’s Blackstone GSPO Capital Solutions II; $150 million to Silver Lake’s flagship tech buyout fund, Silver Lake IV, and Wayzata Investment Partners’ Wayzata Opportunities Fund III, which focuses on distressed debt from smaller issuers.
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