Texas Pension Official: Sovereign-Wealth Funds Crowd Out Pensions on Co-Investing Opportunities


At a recent board meeting, a top official at the Teacher Retirement System of Texas outlined an emerging source of competition for pension funds looking to co-invest: sovereign wealth funds.

Britt Harris, the pension fund’s CIO, said that his fund might have to consider new strategies to get in on the best co-investing opportunities, according to LBO Wire.

More on Harris’ remarks, as reported by the Wall Street Journal:

“The whole emergence of sovereign wealth funds is disrupting the market,” said Britt Harris, the chief investment officer of the roughly $132 billion pension system during a board meeting in February. “We’re in competition with funds outside the country that are very large and very heavily resourced.”

Texas Teachers, which Mr. Harris said could “easily” do transactions above $100 million, faces intense competition for large co-investment deals as sovereign-wealth funds increase in influence.


Texas Teachers sources co-investment deals, which it calls “principal investments,” by focusing on a network of existing general partners and strategic partners.

“We have to convince these guys that we are the people to bring big investments to,” Mr. Harris said.

The pension fund may consider stationing staff in other major cities to expand its presence beyond its Austin, Tex., stronghold. It also is trying to structure transactions creatively.

“We have to come up with new ways of structuring things,” said Eric Lang, senior managing director of real assets and private equity.

Texas Teachers said it hopes to become involved in deals before they are signed and syndicated across a manager’s limited partner base.

“We’d like to be a full underwriting partner,” Mr. Lang said. He raised the possibility that if the pension fund has a larger role in due diligence before a deal closes, “We might have to share in deal costs with the [general partner].”

Texas Teachers manages $132 billion in assets.


Photo by Pete via Flickr CC License

Pensions Uninterested in Indian Debt

India gate

Some of the world’s most prominent pension funds have been eyeing Indian infrastructure investments.

But pensions remain uninterested in the country’s debt. More from the Economic Times:

Despite record inflows in 2014, Indian debt was unable to draw attention of perhaps the stickiest investors in global arena -sovereign wealth funds (SWFs) and global pension funds. These two prominent categories constituted only 1.73% of foreign institutional investors (FIIs) assets under custody (AUC) in Indian debt in 2014 while their pie in equities was 17%.

“SWFs and pension funds participation has been tepid in debt securities compared with equities on account of two reasons. One, tight limits on government debts dissuade them from Indian debt instrument as it artificially creates demand and poses liquidity risks. Second, SWFs desire to see stability across macro variables ranging from currency to the current account deficit and accordingly , they invest for longer term. We have some semblance regarding stability, so we can see inflows to increase if things persist according to what we have seen last six months,” said head of treasury at an MNC bank on condition of anonymity .


Experts, however, believe that the phenomenon may reverse in the current year. In the last six months, the rupee has been least affected by the emerging market currency crisis. In case volatility in the rupee remains low for another couple of quarters, the outlook on Indian debt by SWFs will improve. In addition, sound decision making of the central bank, unlike the policies of central banks of Russia and Turkey, will boost confidence of these long-term investors. The central bank of the latter two countries had flip-flopped on the policy front.

The Canada Pension Plan Investment Board (CPPIB) has been active in India and considers the country a “key part” of its long term plans.

Report: CalPERS’ Strong Real Estate Returns Unlikely To Last

CalPERS real estate returns

CalPERS has seen strong real estate returns since 2011. But a consultant for the pension fund warns in a new report that the consistent double-digit returns are unlikely to continue.

[The report, from Pension Consulting Alliance, can be read here, or at the bottom of this post.]

More details from Randy Diamond of Pensions & Investments:

The PCA report, which is contained in agenda materials for CalPERS’ Nov. 17 investment committee meeting, said sustaining those returns is unlikely because of a challenging and highly competitive investment market.

The report cites increased competition from sovereign wealth funds, high-net-worth investors and other large direct investors in real estate as among the reasons for the potentially declining results. It says persistently low interest rates are fueling the demand for income-producing assets.

In 2011, CalPERS changed the focus of its real estate program to focus on investing in income-producing properties — and away from opportunistic real estate — after suffering massive losses following the crash of the real estate market.

CalPERS spokesman Brad Pacheco said in an e-mail: “We recognize that recent high returns will be difficult to achieve in the current real estate market. Our goals now are to diversify portfolio risk and generate steady, modest gains.”

CalPERS manages $25.6 billion in real estate assets, and is planning to expand its real estate portfolio by 27 percent by 2016.

The report:

[iframe src=”<p  style=” margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; -x-system-font: none; display: block;”>   <a title=”View Real Estate Report on Scribd” href=”https://www.scribd.com/doc/246505443/Real-Estate-Report”  style=”text-decoration: underline;” >Real Estate Report</a></p><iframe class=”scribd_iframe_embed” src=”https://www.scribd.com/embeds/246505443/content?start_page=1&view_mode=scroll&show_recommendations=true” data-auto-height=”false” data-aspect-ratio=”undefined” scrolling=”no” id=”doc_90379″ width=”100%” height=”600″ frameborder=”0″></iframe>”]