US pension fund California State Teachers’ Retirement System (CalSTRS) has committed a total of $5.5 billion to private equity funds in the first half of this year, with Asia-focused funds getting fresh commitments.
According to the pension fund’s semi-annual performance report, which was discussed during its investment committee’s meeting on September 5, exposure to private equity increased from 8.8 per cent to 9.3 per cent of its total portfolio in the first half of 2019.
The pension fund aims to increase the exposure to a long-term target allocation of 13 per cent.
In the first six months of this year, CalSTRS made $5.5 billion in commitments to 21 funds, 8 co-investments, and one diversified secondary co-investment. Since July 2018, CalSTRS made $9.5 billion in commitments.
During the period, CalSTRS completed its $150-million investment in Hong Kong-headquartered special situations investment firm SSG Capital Management.
SSG Capital is expected to close later this quarter its fifth flagship fund, which is likely to exceed a $1.5-billion target. SSG Capital held an initial close for SSG Capital V at $610 million this January and a second close at $1.36 billion in May.
The semi-annual performance report also showed that that the pension fund continues to commit across several vehicles offered by its largest managers – The Blackstone Group, Carlyle Group, TPG Capital, Summit Partners, and Permita.
Specifically, from October 2018 through March 2019, CalSTRS’s PE programme made new commitments to TPG Asia VII, TSSP Capital Solutions, Summit Growth Equity X, Blackstone Energy Partners III, and Blackstone VIII.
TPG reached the final close of its seventh Asia-focused PE fund at $4.6 billion in February. The firm claims that the commitments received exceeded its target. CalSTRS made commitments in TPG’s NewBridge Asia IV and TPG Asia V and VII
Blackstone, meanwhile, raised over $22 billion for Blackstone Capital Partners VIII, its largest-ever buyout fund. Blackstone has a target of reaching $1 trillion in assets under management by 2026.
CalSTRS said its commitment to Carlyle Group includes Carlyle Asia Partners V.
Blackstone Group accounts for 12.6 per cent of CalSTRS’s total PE exposure as of March 31. Carlyle Group accounts for 4.7 per cent while TPG Capital Summit Partners, and Permira, account for 4.4 per cent, 2.8 per cent, and 2.7 per cent of the total PE exposure of the pension fund.
The pension fund admits that while it has a large and capable staff and is able to invest at scale, it faces challenges in deploying large amounts of capital. CalSTRS’s PE performance on a since-inception basis is basically unchanged from Q3 2018, however, the 10-year performance improved by approximately 400 basis points.
In the second half of 2018, CalSTRS made $510-million in PE, venture capital, and co-investment commitments to Asia-focused funds.
The commitment to Asia-focused funds was part of the total commitment of $4.07 billion that CalSTRS made in PE, co-investments, and one diversified secondary co-investment in the six months ended December 31, 2018.
Established in 1913, CalSTRS provides retirement, disability, and survivor benefits to California’s public school educators from pre-kindergarten through community college.