Side Letter: Texas TRS co-investments, EBRD’s €10bn, Pantheon discounts

Should LPs fear not being shown the best co-investment deals? Not if Texas TRS's performance is anything to go by. Here’s today's brief, for our valued subscribers only.

Just happened

Good news for co-investors

Selection bias is at work in co-investment, but not in the way most observers fear. We’ve taken a good look at how Texas TRS is going about growing its co-investment programme; it wants to lift its co-invests to 35 percent from 23 percent of its PE portfolio. “Our co-investments have absolutely outperformed our regular funds,” says Tamara Polewik (pictured), a director in the pension’s private equity co-investment programme. The pension gets shown more than 100 deals a year and does roughly 20. The team also reviews the deals it passes up. On a gross basis, excluding fees, even those transactions have been outperforming the funds themselves, according to Polewik. One co-investment fear is that LPs don’t get shown the best deals. In Texas TRS’s experience, this isn’t the case.

That €10 billion moment

The European Bank for Reconstruction and Development is on track to hit a new milestone: breaking through €10 billion of private and public market investments in 2019. Anne Fossemalle, director for equity funds at EBRD did not share how much of that figure is planned for private equity, only that the market will decide on how much EBRD can and will do. The investor is also preparing for its 2021-25 business cycle and plans to do more in its existing geographies. One possibility is expanding into sub-Saharan Africa in 2021. EBRD, originally set up to promote the development of the former Soviet bloc, has extended its reach across Europe, Africa and Asia, covering almost 40 countries. It started investing in private equity funds in 1992, committing between €150 million and €250 million annually.


Shopping for bargains. Pantheon has been acquiring fund stakes on the cheap with its latest secondaries fund, US pension fund documents show. Its sixth global secondaries fund was 22 percent invested as of February and has picked up assets for an average effective discount of 12 percent. FYI, fund stakes traded at an average 8 discount last year, according to advisor Greenhill.

PGSF VI is seeking $2 billion and held a first close in March 2018, according to the documents.

OTPP ventures forth. Ontario Teachers’ Pension Plan has launched a department for late-stage VC and growth equity investing. The Teachers’ Innovation Platform – which will target companies that use technology to disrupt incumbents and create new sectors – will be led by senior managing director Olivia Steedman, who was previously managing director of its C$26 billion ($19.2 billion; €17.3 billion) infrastructure and natural resources group. TIP will invest through funds, partnerships, platforms or directly and doesn’t have a target allocation, according to a spokesman.

Dig deeper

Want more data? There are more than 6,700 institutions in our database, including Texas TRSPantheon and OTPP from today’s Side Letter.

She said it

“You have to understand that a deal does not look perfect on day 1; understand how the GP is drinking from the fire hose for the deal and be open minded about the due diligence and underwriting process.”

Tamara Polewik, head of private equity direct and co-investments at Texas TRS, talks about the importance of LPs putting themselves in their GP’s shoes.

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Today’s letter was prepared by Toby MitchenallAdam LeCarmela MendozaRod James and Alex Lynn.

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