There can be only one.
The Teachers’ Retirement System of Texas has decided to consolidate its international and domestic private equity advisors into one, universal role. The pension is negotiating with its private equity advisor Hamilton Lane, and Altius Associates, its international private equity consultant, to determine which firm will fill the role.
The advisors' two-year contracts expire on 31 August. “Staff will negotiate with both Hamilton Lane and Altius and choose only one to handle domestic and international consulting,” a pension spokesperson said.
Whichever firm wins the mandate will be busy as the pension has set a goal of spending $1.5 billion on private equity this year.
Investment staff had recommended the pension board discontinue its relationship with Altius and hire Hamilton Lane for the role, to “improve cost effectiveness by consolidating private equity under Hamilton Lane”, according to board documents. Both firms have worked for the pension since 2005.
Staff also recommended the pension renew its contract with Townsend Group for consulting services in real assets, which include real estate and infrastructure investments.
Texas Teachers’ investment staff gave an overview of the various asset classes at meetings earlier this month. The pension has a total $17 billion exposure to private equity, including $7.1 billion in uncalled commitments. The pension has 57 general partners in the portfolio and 105 funds. For real assets, total exposure is $17.6 billion, including $7.2 billion of dry powder. Real assets has 58 general partners in the portfolio and 93 funds.
This year, the pension’s goal is to spend $1.5 billion on private equity and $3.2 billion on real assets “to support long-term diversification”, according to pension documents. It’s unclear how much the pension has actually spent on the asset classes so far. Both asset classes exceeded 18 percent returns in 2010, the documents said.
Mega-buyout is by far the pension’s largest private equity strategy, and its top five managers are Apollo Global Management, with total exposure of about $1.2 billion; The Blackstone Group, with total exposure of $1.13 billion; CVC Capital Partners, with total exposure of about $1.13 billion, Credit Suisse, with total exposure of about $1 billion and The Carlyle Group, with total exposure of about $787 million.
The pension also has created a “real assets special situations” portfolio, which as of 31 March contains about $344 million. The programme targets investments in “high-value opportunities in public equity and select tranches of debt”, according to pension documents.
Documents show that Texas Teachers invested $250 million in Kohlberg Kravis Roberts’ oil and gas producing properties fund, KKR Natural Resources fund, which has raised $257 million as of the end of last year. The pension also last year committed $500 million to General Growth Properties as a retail REIT recapitalisation.
The private markets teams are overseen by Steve LeBlanc, with Rich Hall heading up private equity and Eric Lang leading real assets.
There can be only one.