TRS announces $1.3bn emerging manager commitment

The expansion in Teacher Retirement System of Texas’ emerging manager program comes as the fund has significantly increased its real estate commitments.

The Teacher Retirement System of Texas (TRS) announced a $1.3 billion commitment to its emerging manager program, which includes real estate, over three years.

The expansion in funds, announced at a conference in Austin, Texas on Thursday, will be spread across alternative asset classes, which include private equity, hedge funds and energy and natural resources, as well as real estate.

TRS, a $125.3 billion fund with one of the largest emerging manager programs, plans to invest this capital with both new and existing emerging managers. As of September 30, TRS' emerging manager program had $1.3 billion in assets. Of that, $970 million is in private assets and $330 million is in public assets.

In real estate, TRS committed $788 million to emerging managers in 2015, up from $200 million in 2011. One of the beneficiaries of this program is DivcoWest, which entered the emerging manager program in 2011 and graduated to the larger trust in June. TRS has allocated a total of $265 million to the San Francisco-based real estate investment firm, according to the pension. Last month, TRS made its first commitment to Abacus Capital Group, a New York-based multifamily developer and fund operator. TRS allocated $20 million to Abacus Multi-Family Partners III, a $300 million core-plus fund focusing on North America multifamily properties.

The pension system is also strengthening its relationship with GCM Grosvenor, its advisory firm. TRS plans to create a platform through which it will review Grosvenor’s recommendations after the firm has appraised investment opportunities.

“We believe this will be a more streamlined process, reduce the churn of going back and forth, and provide us with an ability to commit larger dollars and grow with proven managers,” said R. David Kelly, TRS’ chairman, at the conference.

TRS established its emerging manager program in 2005. In 2011, the fund targeted investing $1.65 billion by December 2018 and has made over $1.4 billion in allocations to date, according to the announcement. Initial allocations to new managers are targeted in the $10 million to $20 million range and re-ups of existing managers are targeted to be in the $20 million to $50 million range. Trust level allocations can range from $150 million to $300 million or more.