Texas Muni Commits $380 Million to Real Estate, Absolute Return

Continues long diversification journey

The Texas Municipal Retirement System (TMRS) has committed $380 million to real estate and absolute return strategies. The $25.1 billion fund approved the commitment at its March 30-31 meeting, a fund spokesman confirmed.

TMRS committed $50 million each to Stockbridge Value Fund III and IC Berkeley Partners IV, both real estate strategies. Stockbridge is a diversified value-add U.S.-focused real estate fund with target returns of 12%-15% gross of fees. The Berkeley fund invests in light industrial, multi-tenant properties in the United States. It is an income-focused fund. Both commitments were recommended by the fund’s real estate consultant, Courtland Partners.

The fund also committed $280 million total to three absolute return strategies: $100 million to the BG Umbrella Fund, $90 million to the H2O Alpha 10 Feeder Fund, and $90 million to the Red Cliff Asia Fund. BG is a European-focused multi-strategy opportunistic fund, H2O is a global currency and credit focused macro fund, and Red Cliff focuses on arbitrage opportunities in Asia. Alternatives consultant Albourne Partners recommended the moves.

Prior to 2009, TMRS invested only in bonds due to legislative restriction. Since then, the fund has slowly worked to diversify its holdings. The current target asset allocation is: 17.5% domestic equity (26.9% actual, as of Dec. 31), 17.5% international equity (16.4%), 10% core fixed income (19.2%), 20% non-core fixed income (8.3%), 10% real return (9.2%), 10% real estate (8.5%), 10% absolute return (11%), 5% private equity (0.5%), and 0% cash (0.1%).

By Levi Davis