Rich Hall, the Teachers' Retirement System of Texas' new head of private equity, believes the facts tell the whole story about the benefits of private equity — regardless of the negativity surrounding the asset class stemming from attacks on US presidential candidate Mitt Romney's past career as head of Bain Capital.
During a recent interview with Private Equity International, Hall cited statistics that illustrated private equity’s benefits to the system: “We know that over the last 12 years our private equity portfolio has generated returns that are more than $3 billion higher than if we had invested that money in the public stock market.”
The benefits of the asset class make the “politicisation” of private equity in this year’s US presidential campaign unfortunate, he said.
If we didn't achieve those returns from private equity, where would that $3 billion come from? Teachers? Taxpayers? The federal government?
“If we didn’t achieve those returns from private equity, where would that $3 billion come from? Teachers? Taxpayers? The federal government?” Hall said.
Hall was named head of private equity recently after former alternatives chief Steve LeBlanc announced he was leaving the system earlier this year. He has worked on Texas Teachers’ portfolio for four years, joining the system in 2008. Prior to the pension system, Hall worked at Banc of America Securities, engineering company Tomkins and Dell Ventures. He also served for six years in the US Navy.
While Hall said his day-to-day job will not change very much, the system’s programme will change. Texas Teachers' likely will not be committing at the same pace it had followed for the last several years because it is just about at its 12 percent target allocation, Hall said.
The system also will not be forming a separate account like it did with Apollo Global Management and Kohlberg Kravis
“When you create something new and different and large, [you need to] make sure you keep your eye on the ball and execute and get that thing up and running really well,” Hall said. “We’re not focused on doing more of those [separate accounts] now; [we need to] make sure we’re doing well with the ones we have.”
The benefit of the customised account is that it allows the pension system to be opportunistic and flexible when attractive deals arise.
“This was a goal of ours to continue to support some of our best managers and to have them help us,” Hall said. “If the capital is there and already committed we can choose with them to allocate that capital to very timely market opportunities.”
Subscribers to Private Equity International magazine can read more about Rich Hall in the June issue.