Texas Municipal Retirement allocates $2.8 billion

Texas Municipal Retirement System, Austin, committed and invested a total of $2.5 billion to 20 alternative and traditional funds, according to its most recent investment report.

The new and additional commitments and allocations were made between late April and mid-September by investment staff, the report showed.

By asset class, $650 million was committed to four real estate funds. The $34.8 billion pension fund committed $150 million each to Pennybacker VI, a value-added fund managed by Pennybacker Capital; Platform Texas Manager 1, an opportunistic fund managed by Platform Investments; and Stonepeak Real Estate Partners, a value-added fund, managed by Stonepeak Infrastructure Partners. All three are existing mangers.

Texas Municipal also committed an additional $200 million to Abacus Core Income Fund I, a core-plus strategy managed by Abacus Capital Group. TMRS previously allocated a total of $125 million to the fund.

TMRS' real estate portfolio accounted for 12.5% of plan assets as of June 30. The system's target allocation to real estate is 20%.

TMRS invested a total of $570 million in existing manager Northern Trust Asset Management's passively managed MSCI Large Cap USA Fund from the system's $11.4 billion global equity portfolio.

Global equity accounted for 32.8% of plan assets as of June 30 vs. the 35% target allocation.

From the other public and private markets asset class, a total of $545 million was committed to seven funds managed by four firms.

The largest move was a combined $180 million committed to two funds run by Gamut Capital Management, a new manager for TMRS: $120 million to Gamut Investment Fund II and $60 million to Gamut Investment Fund II Bluebonnet Co-Invest.

Existing manager Oberland Capital Management received two commitments, with $110 million earmarked for Oberland Capital Healthcare III and $55 million in Oberland Capital Healthcare III Co-invest.

TMRS also committed $100 million each to Warren Equity Partners Fund IV, and Flexpoint Ford's Flexpoint Fund V-A and Flexpoint Overage Fund V-A. The report did not specify how the commitment will be split between the two Flexpoint funds.

The system's investment report did not specify the strategies the firms will employ but the individual managers' websites indicate that they primarily are buyout firms.

As of June 30, the system's OPPM portfolio accounted for 11% of the defined benefit plan compared to its 12% target allocation.

From the system's private equity/venture capital portfolio, commitments totaling $413 million went to seven managers.

The largest private equity commitments were $100 million – was to new manager Bregal Investments' Bregal Sagemount IV, a buyout fund managed by Bregal Investments, and €100 million ($98 million) to existing manager Providence Strategic Growth's PSG Europe II, which specializes in venture capital, growth and minority investments.

TMRS also committed $75 million to buyout fund RiverGlade Capital II, $60 million to GreenOaks V, managed by multistage venture capital specialist Greenoaks Capital Partners, and $30 million to Insight XI Follow-On Fund, run by existing manager Insight Partners. TMRS committed $100 million to Insight Partners XI in 2020.

The pension fund also made additional $25 million commitments to buyout funds Tritium III and Dunes Point III. The system committed $75 million each to the funds earlier this year managed by Tritium Partners and Dunes Point Capital.

As of June 30, TMRS' allocation to private equity was 9.8%, close to the system's 10% target.

Investment staff committed a total of $300 million to Pemberton Strategic Credit Fund III, managed by existing manager Pemberton Asset Management, from the $7.2 billion non-core fixed-income portfolio.

Within the fund, $250 million will be managed in direct lending and $50 million will be managed in a co-investment vehicle, according to TMRS' report.

Separately, TMRS further increased its allocation to direct lending beyond the Pemberton commitment above, after trustees approved an increase of $200 million to TCW Brazos Fund, bringing the total invested in the fund to $500 million during a Sept. 22 board meeting, a TMRS spokeswoman confirmed in an email.

Trustees were required to approve the additional investment in the Brazos fund because the $500 million allocation will exceed staff delegated limits for investment discretion, board materials showed.

TMRS initially committed $300 million to the fund managed by TCW Group in 2015.

"An increased commitment to TCW provides additional yield enhancement and diversification with a manager that has a differentiated approach to sourcing loans at a yield premium to conventional loans underwritten by peers," according to the board report.