Arizona, Texas pension funds hike alternatives exposures

The two pensions each increased their investment allocations for private equity.

The Employees’ Retirement System of Texas and the Arizona Public Safety Personnel Retirement System have each upped their exposure to private equity after adjusting their asset allocations, documents from the two pension funds showed.

Austin, Texas-based ERS, which has $26.9 billion in assets under management, according to PEI data, is planning to up its private equity allocation from 10 percent to 12 percent over the next two years, which will again be increased to 13 percent in years three and four.

ERS added an opportunistic credit bucket to its portfolio, which over the next two years will be set at 2 percent, comprising 1 percent each of private credit and real estate debt. In the third and fourth years, that bucket will be 3 percent, with the two sub-asset classes each having a 1.5 percent allocation.

Other alternative asset class allocations in ERS’s portfolio were also hiked, with real estate increasing from 10 percent to 11 percent over two years. An additional percentage point will be added in years three and four, taking the allocation to 12 percent of the portfolio. Infrastructure increased from 4 percent over the first two years to 6 percent, rising to a 7 percent target in the third and fourth years.

At its June meeting, the $9.2 billion Phoenix, Arizona-based PSPRS also approved a 1 percent increase to its private equity allocation, lifting it from 11 percent to 12 percent.

This increase came with a subsequent boost to its allocation targets for other alternative asset classes, including an increase in its private credit allocation from 15 percent to 16 percent and its real assets bucket from 8 percent to 9 percent. All new allocation targets went into effect 1 July.

PSPRS’s private equity bucket at the pension plan is above this new target allocation, comprising 14.1 percent, as of 31 May, an agenda for its August meeting showed. Its private equity allocation showed a gross return of 15.27 percent in the year to 31 May.

– Justin Slaughter contributed to this report