Texas Muni plots $600m in PE investment, commits to GSO

The pension fund has set its annual pacing plan to private equity investments and tapped GSO’s mezzanine fund for a $75m mandate.  

The Texas Municipal Retirement System (TMRS) has approved up to $600 million in private equity manager searches for 2016.

The pension plan, which began investing in private equity last year, will run a $150 million search each quarter and place the money with up to three managers.

It has already pledged $75 million to GSO Capital Opportunities Fund III, the latest in GSO Capital Partners’ mezzanine series and which launched this year, as PDI revealed.

At present, TMRS has 63.1 percent invested in special situations and 36.9 percent in buyout, but plans to diversify. Its policy strategy range will be 40-75 percent buyout/control, 10-35 percent special situations and opportunistic, and 5-25 percent growth/minority/venture.  

TMRS said it invested with GSO because of the firm’s deep, experienced and stable team, strong credit underwriting, top quartile performance and operational resources.

Among the risks listed was GSO’s Blackstone ownership, which sees GSO retain 15 percent of the equity and 50 percent of the carry. However, GSO also benefits from Blackstone’s “expansive resources”. The vehicle is targeting 12-14 percent returns.

Crescent Mezzanine Partners VII, Highbridge Mezz Partners Fund III, Sankaty Middle Market Opportunities Fund III, KKR Private Credit Opportunities Fund II and THL Fund III were the other finalists in the search.

Last year, the retirement fund placed $350 million with TSSP Special Situations Partners, Carlyle Energy Mezzanine Opportunities Fund II, HIG Bayside Loan Opportunity Fund IV, Tritium I, Searchlight Capital II and Harvest Partners VII, as PDI reported.

Consultant StepStone has been advising the pension plan on manager searches.