The Tennessee Consolidated Retirement System has increased its interim and long-term targets to private equity, including alternative lending strategies like direct and mezzanine lending and real estate, while lowering targets to most other asset classes, Private Debt Investorsister publication Private Equity Internationalreported.
“The TCRS Board of Trustees adopted a new revised asset allocation strategy as recommended by the Department of Treasury investment staff and supported by Verus Advisory, the general investment consultant for TCRS,” said a spokeswoman for the Tennessee Department of Treasury.
The revision was approved at TCRS's board meeting on 18 November.
“Among other items, the revised investment policy sets limits to the asset allocation range for private equity, including strategic lending, and real estate.”
Nashville-based TCRS had a 5 percent policy target for strategic lending, which will now be upped to 7 percent on an interim basis and to a 10 percent strategic target.
The pension fund also had a 3 percent policy target to private equity, which the board agreed to increase to a 7 percent interim target and a 10 percent strategic long-term target. The board also set a combined maximum allocation of 20 percent for private equity and strategic lending, up from 10 percent.
The prior policy target of 7 percent to real estate was increased to 10 percent both as an interim target and strategic long-term target. The upper limit for the asset allocation range for real estate was also increased to 20 percent from 10 percent.
The interim targets will become effective 1 January and are intended to be in effect for a three- to five-year period to transition to the long-term strategic targets, the spokeswoman noted.
Meanwhile, the pension plan lowered its targets to its different equity strategies by one to two percentage points, and its fixed-income bucket to 20 percent from 25 percent. It also decreased its target to inflation-indexed bonds to zero from 4 percent.
TCRS, which manages $43 billion in assets, has a 3.2 percent allocation to private equity and a 7.5 percent target to real estate.
Recent commitments made by TCRS include pledges to two Hayfin Capital Management funds, $100 million to Hayfin Direct Lending Fund II and $50 million to Hayfin Special Opportunities Fund II, according to PDI data. Both funds, which were launched last year, have reached a first close. The direct lending vehicle locked down €1.2 billion for its €2.25 billion target, while the special situations capital pool garnered €700 million toward its €1.5 billion goal.
Andrew Hedlund contributed to the report.