US pension fund manager Teachers Retirement System of Texas (TRS) has committed $2 billion to credit strategies, split between managers Apollo Global Management and KKR & Co., approved at a board meeting on 26 March. In addition, TRS approved an increase of another $2 billion to the managers to add to previous mandates.
The approvals increase TRS’s allocation to the two investment firms, from $3 billion to $5 billion each, or from $6 billion to $10 billion in aggregate, plus realised profits to be re-invested.
Two separate $1 billion commitments to two different fund of funds, managed and operated by affiliates of the US investment firms, were approved at a meeting of the board of trustees “to pursue certain credit and debt market and related opportunistic investments”, documents from TRS show. The allocations can also be used for co-investments.
The commitments were approved after presentations by Leon Black, founder of Apollo, and George Roberts, co-founder of KKR. James Zelter, Apollo’s chief investment officer for credit, and Scott Nuttall, KKR’s head of global capital and asset management, were also in attendance at the presentation, as well as TRS chief investment officer Britt Harris, and TRS senior investment manager on the original $6 billion private markets strategic partnership, Courtney Villalta, according to the TRS website.
The limited partner approved two other $1 billion increases at the board meeting for additional investments under the original partnership agreements, entered into in early 2012. Since that time, more than $3 billion has been invested by both firms “in a wide array of global private investments in equity, real estate, debt and opportunistic strategies”, spokeswoman for the pension fund, Juliana Helton, explained in a statement.
TRS will now operate two separate account mandates with both Apollo and KKR.
Since inception, the TRS Private Strategic Partnership and related investments have produced aggregate results exceeding 15 percent per year, Helton said.
TRS had a market value of $129.9 billion and an investment return of 8.5 percent as of the end of 2014, which means it is ranked in the top 15 percent of similar pension funds, the statement said. Its consultant, Aon Hewitt, commented that the Trusts’ overall investment strategy has been below the average risk level of other funds.
Apollo and KKR declined to comment.