International Real Estate Tapped As Investment Asset By Texas Teacher’s Pension
The Texas Teachers Retirement Fund is currently being diversified as its fund managers are currently placing it on the international real estate market. According to The Real Deal, the $3 billion-worth Teacher Retirement System of Texas is shifting $500 million into Dallas-based private equity firm Lone Star Funds to diversify their assets.
IP&E Real Assets covered the transaction, where about $300 million is invested into Lone Star's Real Estate Partners VI Fund. The investment is seeking properties totaling to $3 billion and will look for these in Asia, North America, and Western Europe. It will also invest around $200 million into the Residential Mortgage Fund II.
That's not all its looking to invest into. $10 million will go into the CBRE French Logistics Feeder. Previously, it was a $100 million pension fund investment into the CBRE fund. This year, however, it will be investing $150 million into the Global Energy & Power Infrastructure Fund III, in a departure from the real estate investments it already completed.
This is a sort of welcome news after the Teacher Retirement System faces an overhaul pending a decision from the Texas Legislature. The Houston Chronicle reported that the fund faces a 'repair' or will be at risk of deteriorating, and become the problem of a whole new generation of lawmakers.
Texas' past and present teachers have received retirement benefits of approximately $200 billion. However, the fund currently has around $154 billion on hand with which to pay off those remittances and benefits. TRS is needing at least $46 billion of its funds, or else there will be a deficit for those who will receive the benefits.
The worsening situation in funding, according to reports, has been traced to two primary problems. The TRS has been consistent in underestimating costs incurred by the benefits. There is also the problem with the state legislature, which has failed time and again to appropriate contributions sufficient enough to fill the pension fund's coffers.
As for which real estate the funds are targeting, Manhattan real estate has been a target of interest for the fund's managers. However, even New York City's own retirement systems have been wary of the market, although they had other investment targets of their own. It remains to be seen whether this action will bring about the needed funds to complete the payoff of Texas' teachers.