The Teacher Retirement System of Texas (Texas TRS) approved four commitments totalling $1.35B to real estate strategies and is considering changes to its strategic asset allocation strategy that could see it remove China from its emerging markets benchmark and potentially reduce exposures to private equity.
In recently published minutes from its September 19 meeting, the Texas TRS said it made three commitments to new partners: $1.1B to Waterloo Property Partners, $150M to Cerberus Multi Listing Exit Fund, and $54.5M to Core Atlanta Northside Fund. It also allocated $50M to existing partner GIP Polaris Fund.
The Texas pension fund's investment committee is also recommending the board approve changes to its asset allocation strategy that would include a reduction in the fund's overweight to emerging markets, with less confidence in their future outperformance due to geopolitical instability and waning globalism. As part of this shift, China would be removed from the pension's emerging markets benchmark. The reduction in emerging market exposure would be offset by increased allocations to US equities and non-US developed markets.
Additionally, the committee highlighted a decline in private equity's outperformance over the past decade, driven by increased competition, and recommended reducing exposure to government bonds and risk parity strategies due to their sensitivity to interest rates. The proposed adjustments are the result of a year-long review and aim to better position the fund for current market challenges.
Per Dakota data, the Texas TRS oversees approximately $203B in assets. As of June 30, 2024, the System allocates 14.4% to real estate exposures with a policy target of 15%.
