The Teachers’ Retirement System of Louisiana has committed $250 million (€162 million) to several private equity and real estate funds as it looks to move closer to recently restructured and augmented alternative allocation targets.
The $16 billion state pension, or TRSL, will commit up to $50 million to Walton Street Capital’s sixth real estate fund, which the Chicago Business Times last year reported as targeting $2.5 billion. The pension also committed $75 million to Texas-based Crow Holding Realty Partners’ fifth fund and up to $125 million to CVC European Equity Partners V, said chief investment officer Bob Leggett.
The CVC fund is targeting €11 billion and has a €12.1 billion hard cap, according to the Pennsylvania State Employees’ Retirement System, which earlier this year committed €300 million to the fund.
The commitments come as the pension reorganizes its alternative investment strategy under the guidance of Hamilton Lane.
In February, its board shifted the pension’s real estate portfolio to become one of its alternatives buckets. That, coupled with a decision to boost debt and special situation fund exposure because of current market conditions, led the pension to increase its alternatives target to 28 percent from 22 percent, said Leggett.
Its private equity target is 10 percent, while its target for real assets is nine percent. It also has a carve-out for debt and special situations funds, which has an eight percent target, and its hedge fund target is one percent.
“We have an 8.25 percent actuarial target and one has to ask themselves how they’re going to achieve that,” Leggett said. “Our view is over the long term, making that [allocation] mix slightly different would allow for that.”
For the last fiscal year ended 30 June 2007, the pension’s alternatives programme, which did not include real assets, returned 36 percent, while its international private equity investments “realised a phenomenal 125.48 percent return”, according to a statement.
Its strategy in terms of hitting its new targets will be further developed in August when TRSL creates its strategic plan, Leggett said. Past commitments to private equity funds have favoured large, brand name firms including Warburg Pincus, Apollo Management and the Carlyle Group.
Whether or not the pension will continue its exposure to mega-funds is a good question, Leggett said. “The environment’s changed.” How the pension should adapt is part of what Hamilton Lane will help guide as TRSL develops its strategy, he concluded.