Texas pension considers $1.1bn to alternatives

The $19.7bn Texas County & District Retirement System has given preliminary approval for $600m of commitments to private equity and another $575m to natural resources and debt funds.

The Texas County & District Retirement System, with $19.7 billion in total assets, has given its investment staff authorisation to make more than $1 billion of private equity, natural resources and debt-related commitments, according to system documents.

Texas County and District provided the documents outlining recent commitment activity in response to an open records request by Private Equity International ‘s sister publication Private Debt Investor earlier this month.

The commitments are subject to further investment and legal due diligence, though investment staff has the authorisation to make the commitments, pending the final reviews, according to a pension spokesperson. “The board approved those funds subject to investment and legal due diligence. That means that [the system's] funds may or may not be actually committed to these investments in the future,” the spokesperson said. “Investment staff has the go-ahead to investigate further and the authorisation to invest in these funds, but only after the due diligence process has been completed.”

The system's investment board, which increased its allocation target to private equity to 10 percent in December, approved $600 million to US and non-US private equity funds at its April meeting. Its annual commitment budget increased to $700 million. The system’s actual allocation stood at about 6.8 percent at the end of last year, according to the documents.

The board approved commitments of $75 million each to Grey Mountain Partners Fund III, which is reportedly set to close on its $350 million hard-cap, according to Dow Jones; Kelso Investment Associates Fund IX (target unclear); Adelis Equity Partners’ debut fund, which is targeting €350 million, according to PEI’s Research & Analytics division; Sweden-based Altor Equity Partners Fund IV, reportedly targeting €2 billion, according to Bloomberg; CVC Capital Partners VI, targeting €9 billion; Asia-focused Legend Capital’s LC Fund VI (target unclear); Norway-based FSN Capital Fund IV (target unclear); Onex IV and Hahn & Company II.

Texas County and District also authorised pledging $75 million each to natural resources-focused Sheridan Production Partners III, and EIG Global Energy Partners Fund XVI, targeting $4.25 billion. The system also approved a commitment of $50 million to M/C Venture Partners Fund VII.

The system also approved a slew of commitments to credit-related strategies, including $75 million each to distressed debt-focused managers Mount Kellett, for its third fund; York Capital Management's Special Opportunities Fund II and York's Distressed European Credit fund; Redwood Capital Management Distressed and Capula Investment Management European Special Situations Fund.

On the direct lending side, the board approved committing an undisclosed amount to Summit Partners' second credit fund; Ares Capital Europe II, DRC European real estate debt II, and two special accounts with Oaktree Capital Management and Crescent Capital.

As of 31 December, the system had a 2.4 percent allocation to distressed debt on a 3 percent target. For more information about the system's credit strategies, see PEI's sister publication Private Debt Investor at www.privatedebtinvestor.com.