After being in the market for a full year, the Teacher Retirement System (TRS) of Texas is actively reaching out to real estate firms not yet in the fundraising market to participate in its $500 million real estate segment of its emerging manager programme.
Initially launched in 2005 to guide private equity shops looking to start fundraising, the $850 million TRS Emerging Manager Program was expanded in October 2010 to include real estate firms. With the help of Credit Suisse Asset Management, which has discretion over $200 million of the total $500 million committed to the endeavour, the programme aids US real estate firms looking to launch a first or second fund ranging between $100 million and $500 million.
In addition to committing an average of $15 million of start-up capital to each fund, the $110 billion retirement plan guides firms in shaping their policy and whether they should even launch a fund. After all, an operator with years of experience in a local market may not necessarily be equipped to manage money on behalf of large institutions.
“We work with managers to determine if they're ready to come to market and help them adapt so they can be completely ready,” said Stuart Bernstein, the investment manager at TRS who runs the programme. “We help them built credibility, participate in their fund early to help with fundraising momentum and integrate them with our team.”
Peter Braffman, the partner in Credit Suisse Asset Management’s customised fund group with discretion over the $200 million pool, added: “If you think about the universe of emerging managers out there, there are about 300 that are actively trying to raise capital and less than 10 percent of them actually raise capital. So it's a very hard environment.”
Bernstein, who spoke with PERE while visiting New York to seek out possible candidates for the programme, added that entering into real estate was the natural next step after seeing considerable success with its private equity effort. Speaking to an average of three to four managers per week, he expects anywhere between 10 and 20 real estate firms to be involved in 2012.
In January, TRS co-hosted the inaugural Real Estate Emerging Managers (REEM) Summit in Austin along with Morgan Creek Capital Management and the Employees Retirement System (ERS) of Texas, which also has a similar emerging manager programme for real estate firms.
To read more about TRS’ and ERS’ emerging manager programmes, see this month’s PERE magazine.