Texas ERS Terminates Decade-Old Relationship with Investment Consultant

ERS also brings a new infrastructure private equity consultant on board.

The Texas Employees’ Retirement System (ERS) hired a new general investment consultant after having held an almost decade-long relationship with its current advisor, Aon Hewitt.

Aon Hewitt had provided general investment consultancy services to the ERS since 2009.

The system’s investment committee voted to hire NEPC after a competitive tender process launched on July 6.. The RFP provided that the selected consultant will hold several key responsibilities, including asset allocation and asset liability modeling, review and evaluation of the trust’s portfolio, policy review, and manager advisory services.

More than 30 unique firms requested access to partake in the solicitation, and six firms provided official submissions by the solicitation’s deadline, including Aon Hewitt, NEPC, Meketa Investment Group, Pension Consulting Alliance, RVK, and Verus Advisory.

After grading the respondents based on qualifications, price, methodology, and other means, the retirement system shortlisted the list of respondents to three; Aon Hewitt, NEPC, and Verus Advisory.

“We felt the NEPC’s take on the way they are looking at asset allocation, and the combination of their resources with this firm, the team that they were providing, as well as the opportunity to have new insight,” led to the decision to hire NEPC, Deputy Chief Investment Officer Sharmila Kassan said. “I think any of the finalist were just fine—we were talking very tight evaluations scores.”

NEPC will begin with the ERS on January 1.

The ERS also hired a new infrastructure private equity consultant, CBRE Caledon, replacing Pavilion Alternatives Group in the process.

Pavilion had served as the ERS’ private equity consultant since August 2007, but its contract was amended in August 2013 to implement infrastructure-related services as part of Pavilion’s scope of work.

CBRE Caledon will be responsible for assisting in the analysis and assessment of funds, co-investments and infrastructure investments, monitoring portfolio performance against the designated benchmark, and assisting in periodic review for ERS’ existing policies and benchmarks for the infrastructure program.

Albourne America, Pension Consulting Alliance, StepStone Group Real Assets, Hamilton Lane Advisors, Townsend Holdings, Meketa Investment Group, and Pavilion Alternatives Group bid for the contract.

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