The board of the Employees Retirement System of Texas (ERS) has approved a revamped investment policy statement for its fiscal year 2023, which includes an increase in the system’s policy allocation to private equity from 13% to 16%. At its Aug. 24 meeting, the board also approved a pacing plan for new infrastructure and real estate commitments over its next fiscal year totaling up to $600 million, CIO David Veal confirmed.
Among its priorities for its fiscal year 2023 (which began on Sept. 1) ERS will seek to implement an asset liability study that was conducted in its fiscal year 2022 and to address key recommendations from its investment consultant and internal auditors. ERS will also complete a governance review with its consultant NEPC. That review is set to commence later this year or in early 2023. It will focus on the system’s integration of a best-in-class investment policy statement (IPS), investment implementation plan (IIP), and standard operating procedures (SOPs). A report on the review is likely due to the system’s board on early 2024, according to fund documents.
As part of ERS’ proposed private infrastructure tactical plan for its next fiscal year, it will review and consider private infrastructure commitments totaling $200 million to $300 million through three to six fund commitments and two to four co- and direct investments.
In the real estate class, ERS private real estate annual tactical plan for its fiscal year 2023 includes commitments totaling $200 million ($100 million to $300 million range) to three to six investments mostly with existing managers, but new relationships may be added.
As of June 30, the ERS’ overall asset allocation breakdown stood as follows: global equity 32.9% (policy 37%); total rates 11.1% (policy 11%); global credit 9.8% (policy 13%); infrastructure 5.2% (policy 7%); absolute return 4.8% (policy 5%); private equity 19.7% (policy 13%); real estate – private 11% (policy 9%); real estate – public 2.8% (policy 3%); cash 1.7% (policy 1.2%); and special situations 1.1% (policy 0.8%).
