Texas County & District Retirement System’s Private Equity Investing Pace Has Slowed

By David G. Barry


If you need proof that institutional investors are committing fewer dollars to private equity firms in 2022, look no further than the Texas County & District Retirement System.

Through the end of September, TCDRS has committed $1.5 billion, or a third of the $4.6 billion it committed to private equity funds in 2021, according to information posted on its website. The $41.7 billion pension fund has actually backed more funds – 35 – than the 26 it did in all of 2021. Of the $4.6 billion it deployed in 2021, $812 million came between Sept. 1 and Dec. 31.

A pension fund spokesman did not immediate return a message from Markets Group on what TCDRS’ private equity pacing plan for 2022 was slated to be. As of June 30, TCDRS’ allocation to private equity was 27.6%, slightly above its 25% target.

Through the first half of the year, global fundraising for private equity funds was at $337 billion, compared with $459 billion during the same period in 2021, according to Private Equity International. With many investors overallocated to private equity and distributions slowing, fundraising has become much more difficult for firms than it was in 2021.

Private equity played a key role in TCDRS being among the few public pension funds to generate a positive return for the fiscal year ended June 30. The system said it posted a 3.1% return, well above its negative 0.4% benchmark. Private equity was its best-performing asset class with a return of 28.4%.
During the first quarter of the fiscal 2022-23 year, TCDRS only committed a total of $229 million to four funds – two from Spectrum Equity Partners – and one each from Synova Capital and H.I.G. Capital. Perhaps more notably, TCDRS has only invested $100 million or more in three funds to date in 2022 and none since April, when it committed $100 million to DCVC VI, L.P. Its largest commitment has been $125 million to Veritas Capital Fund VIII, L.P. Its third $100 million commitment was to Advent International GPE X L.P.

In contrast, TCDRS made nine fund commitments of $100 million or more in 2021, topped by the $150 million it invested in Hellman & Friedman Capital Partners X, L.P.

TCDRS’ real estate investing is on par with what it did in 2021. Through September, it has put $547 million into eight funds, including most recently $75 million into Pennybacker VI. In 2021, it committed $789 million to seven funds. The system’s allocation to real assets was 9.9% as of June 30, essentially right at its 10% target.

TCDRS also has not made a commitment to a direct lending fund since May. Up to that point, it had deployed just over $1 billion. In 2021, it committed $1.6 billion. Overall, the system has a 29% allocation to credit and was at 26% as of June 30. Strategic credit and distressed debt also are part of that mix, but the system has not made any allocations to those asset classes in 2022.