Texas Teachers' raced to grow alternatives

Under Steve LeBlanc’s leadership, the private markets programme expanded at a fast clip, with the system averaging ‘two to three’ investments per month.

The Texas Teachers’ Retirement System’s private markets team averaged “two to three” investments per month over the past four years, Steve LeBlanc, the pension system’s private markets chief, told the board at a meeting last week.

“We have not kept a running tally of the number of investments we made, but we did 116 investments during that time period,” LeBlanc said at the meeting. Private Equity International reviewed a webcast of the meeting. “We were averaging two to three investments per month every month for those four years [since LeBlanc joined in 2008].

The system announced earlier this month that LeBlanc was leaving the system in June, after spending four years building the private markets programme into perhaps the most active in the industry. Since LeBlanc joined, the pension system has become one of the most influential limited partners in private equity, building innovative relationships with general partners and becoming one of the biggest supporters of industry guidelines meant to better align the interests of LPs and GPs.

I feel like this is the end of an era.

David Kelly

When LeBlanc joined, he and the system’s chief investment officer Britt Harris devised a strategy to focus on the private markets programme. The strategy included the development of a “portfolio matrix” to determine where they would invest in private equity and real estate; it also involved the creation of the “Texas Way” of investing in private equity, which involved the development of a premiere list of general partners to whom they wanted to commit capital. Finally, the system doubled the private markets team from 10 to 23 people, LeBlanc said.

To make room for growth, the pension system boosted its private equity allocation from 3 percent to 10 percent, and then 12 percent. The real assets allocation target was raised from 3 percent to 15 percent.

LeBlanc said he finished the job he was hired to do and decided it was time for a younger generation to take over the reins. He said when he started he told some members of the investment team that one of his most important jobs was to get them ready to take over the programme.

“I said, ‘my job is to get you my job’,” LeBlanc said. Next generation staffers in the private markets programme include senior leaders Eric Lang and Rich Hall.

The pension system is working on a transition plan ahead of LeBlanc's departure that could lead to a reorganisation of the management structure around various investment divisions, a spokesperson for Texas Teachers' said Tuesday. The system will try to promote from within first to fill vacancies and is hoping to finalise its plans by the end of April, the spokesperson said.

LeBlanc said he will provide a more in-depth report about the investment programme and what the team accomplished over the past four years.

Texas Teachers’ board of trustees applauded LeBlanc after his report, and board chairman David Kelly said the private markets chief fulfilled all the promises he made when he joined the system.

“I feel like this is the end of an era,” Kelly said. “It is extraordinarily rare when you can talk to a guy … years later and say everything you said you were going to do, you did. I’m disappointed to see you go, but I’m absolutely impressed with you in the fact you achieved everything you set out to achieve.”