The Texas State Board of Education, which oversees the Texas Permanent School Fund, has renewed its private equity contract with Neuberger Berman for another three years, according to a webcast from the September meeting of the pension fund’s investment committee.
The part of the programme concerning co-investments and secondaries will remain the same, with both parties having joint discretion over investments. Management fee will be as high as 30 basis points during the three years, but the average over 10 years will consist of 27 basis points, while the carried interest will be 7.5 percent for secondaries and 10 percent for co-investments, according to the webcast.
The part of the programme concerning primary investments will be modified, with Neuberger Berman giving advisory services but not having discretion over investments. Staff will now make their own decisions on investments. This represents the third phase of the programme that the pension plan initiated in 2010 to jump-start its exposure to private equity.
The current contract, which ends in July 2016, was renewed for three years, with the possibility to extend it for an additional three years. The board’s approval was based on the recommendation of the Committee on School Finance Permanent School Fund and presented by consultant NEPC.
“The board approved selection of a non-discretionary advisory model as presented by NEPC for phase III of the private equity program, and to contract with Neuberger Berman LLC for a discretionary separate account to invest in private equity co-investments and secondaries; and also for non-discretionary advisory services for primary private equity investments for phase III of the private equity program,” according to minutes from the meeting.
The Austin-based Texas Permanent School Fund, which had $36.3 billion in assets as of 31 August 2014, has a target for private equity exposure of 10 percent. Its private equity programme, which was started in May 2010, currently represents 4.8 percent of total assets.