The Employees Retirement System of Texas has committed $402 million to private equity since the beginning of its fiscal year on 1 September, 2012.
The commitments include a $100 million pledge to Riverside Capital Appreciation Fund VI, which had raised about $1.29 billion of its $1.5 billion target as of May. An additional $91 million was committed each to Hg Capital VII, which closed in April on £2 billion (€2.3 billion; $3.1 billion) and Triton Fund IV, which closed on €3.3 billion earlier this year. The system also pledged $50 million to Blue Wolf Capital Partners’ third fund, which closed on $300 million, the documents disclosed.
Texas Employees also invested $25 million in Southern Cross Group’s fourth secondary vehicle, which surpassed its $1.25 billion target and raised $1.68 billion. A total of $45 million was committed to three co-investments, according to the documents.
The pension system plans to commit to six or seven funds and four or five co-investments during this fiscal year, which ends on 31 August. Commitments are expected to total about $700 million, or within a range of $525 million and $875 million, according to the documents.
During the 2014 fiscal year, Texas Employees plans to invest about $1.25 billion, or between $937 million and $1.56 billion, in six to 10 private equity funds or co-investments, the documents said. For the four years following fiscal year 2014, the system will commit about $950 million, or within a range of $712.5 million and $1.18 billion, to the asset class. The geographic focus of the commitments will be the US, Europe and Asia, the documents disclosed.
The investment advisory committee cites the growth in the system’s total fund market value this year and a higher private equity allocation as reasons for the increase in commitments. The actual private equity allocation is about 6 percent, as of 30 June, with a 10 percent target, a spokesperson from the system told Private Equity International.
The target allocation also will allow Texas Employees to increase its commitment size, which is currently up to $150 million to individual funds and up to $20 million to co-investments. But during its meeting Tuesday, the board approved a recommendation to increase commitment values to $200 million and $50 million respectively. The largest commitment made to date has been $125 million, according to the documents.
Texas Employees private equity portfolio is led by Brad Demicco, who joined the pension system in April 2009 and focuses on distressed and venture capital investments. The director of private equity is Wesley Gibson, who also joined in 2009 and focuses on Latin American investments and the secondaries market, according to the statement.
Altius Associates is Texas Employees’ private equity consultant.