By Muskan Arora
The $22.8bn Arkansas Teacher Retirement System unveils its $750m
allocation to RA and $400m PE pacing for 2025.
The system returned 18.5%, 4.5%, 8.6% for its 1-,3- and
5-year return period against the benchmark of 23.2%, 4.9%, 9.6% as of October
31.
Real Assets
Slowly reducing exposure from office spaces, the system will
allocate $300m to core real estate to invest in sectors “driven by secular
tailwinds” including multifamily and industrial.
To take advantage of the limited housing supply and obsolete
industrial assets, Arkansas TRS will allocate $100m to non-core real estate
next year to “maintain a healthy risk tolerance.”
Within its real assets sleeve, which has a target allocation
of 15%, the system has agreed to increase its infrastructure sleeve by 2%,
which is transferred from a 2% decrease in its real estate sleeve.
As of June 30, the system allocated 11.6% to its real assets
sleeve.
The pacing was increased to $350m to increase exposure to
infrastructure and meet the long-term goal of 4%, as stated in the meeting
materials.
In the December meeting, the system committed $50m to Long Wharf Real Estate Partners VII, focusing on middle market commercial real estate properties across the U.S.
Private Equity
To maintain a 12% allocation to PE, the system will allocate
the $400m pacing equally among approximately 10 funds over the next year.
The pension plan favours buyout/growth strategy with an
exposure to U.S. within its 2025 commitments with a couple of predicted
investments to early and late-stage venture capital both within US and global.
The reason behind the pacing plan is to generate a long-term
return of 200 bps over the Dow Jones U.S. Total Stock Market index, plus a
liquidity premium of 2 percentage points per year over a full market cycle for
private equity (approximately ten years).
In the December meeting, the system allocated $35m each to Riverside Value II, NovaCap VII, Revelstoke IV and Peak Rock IV. All of these funds are focused on either small or mid-market buyout strategy or both.
Arkansas TRS is keen on investments within technology, industrial,
energy and healthcare sectors with a focus on North America and slight exposure
to Europe and Asia.
Buyout is such a darling, that the system has over 80
commitments or $3bn allocated just to the strategy.
