The $27.58 billion Texas Municipal Retirement System approved $250 million in private equity commitments at its February board meeting, almost 47 percent of its annual pacing target of $525 million for 2019.
The pension system signed on new relationships with Reverence Capital Partners and Arcline Investment Management, committing $50 million to each, and re-upped to new funds from Providence Strategic Growth (PSG) and Foundry Group at the meeting.
Arcline Investment, founded by former Golden Gate Capital executive Rajeev Amara in late 2018, is targeting $1.25 billion for its debut fund, which will invest in eight to 10 mid-market industrial companies requiring equity cheques up to $300 million. Shyam Ravindran and Alex Iannaccone also left Golden Gate to join Amara at Arcline. The firm will continue to execute the same strategy Amara and his colleagues developed and followed at Golden Gate Capital, pension documents said.
Reverence Capital, founded in 2013 by ex-Goldman Sachs colleagues Milton Berlinski and Peter Aberg and ex-General Atlantic managing director Alexander Chulack, is targeting $750 million for its sophomore opportunities fund. The fund will target eight to 12 investments in mid-market financial services companies with strong management teams and strong franchises. The investments could be majority or influence-oriented minority interests.
New York State Common Retirement Fund committed $25 million and City of Hartford Pension Commission committed $8 million to Reverence’s second fund.
Reverence’s debut fund produced an internal rate of return of 47.8 percent as of 31 December 2017, according to City of Hartford documents.
Mid-market focused Texas Municipal has backed emerging managers, and their debut or sophomore funds, since the programme’s inception in 2015. These include Searchlight Capital, Tritium Partners, Dunes Point Capital, Kainos Capital, Lightbay Capital and Main Post Partners.
At the February meeting, Texas Municipal also committed $50 million to Providence Strategic Growth’s fourth fund, targeting $1.75 billion. The new fund is expected to follow the same strategy as its predecessors, investing between $5 million and $75 million in 20 platform investments. The pension previously committed $60 million each to PSG’s second and third funds in 2016 and 2017, respectively.
Texas Municipal also committed $100 million to Foundry Group’s 2018 Partner fund, which will co-invest alongside Foundry Group Next 2018 into high potential and access-constrained early stage venture fund investments. Texas committed $45 million to Foundry Group Next 2018 last year and $35 million to Foundry Group Next in 2016.
Texas Municipal’s $556 million PE portfolio was made up of buyouts (52 percent), venture/growth (28 percent) and special situations (18.99 percent), as of 31 December. Its buyout investments returned 26.96 percent over one year and 18.99 percent since inception; venture/growth returned 58.25 percent over one year and 26.98 percent since inception; and special situations returned 15.17 percent over one year and 10.44 percent since inception as of 31 December.
The pension’s private equity portfolio was predominantly US-focused (78 percent) and international (22 percent). The portfolio returned 39.19 percent over one year and 19.20 percent over three years as of 31 December.