The Texas Municipal Retirement System (TMRS) is set to commit up to $15bn over the next five years to a programme that will allow the $44bn pension fund to co-invest directly in private market transactions alongside its external fund managers, according to a report by Bloomberg.
Under the initiative, TMRS will make co-investments ranging from $10m to $200m per deal, spanning secondaries, growth capital, and other private market opportunities. The programme aims to strengthen relationships with existing managers while saving the pension “hundreds of millions in fees” annually, according to chief investment officer Yup Kim.
Co-investing, which allows investors to commit capital to specific deals rather than pooled funds, has grown in popularity for institutional investors because it typically avoids management fees and carried interest while enabling more targeted investments. TMRS plans to deploy capital across global managers in venture capital, buyouts, real assets, and structured equity, and will consider both its current managers and new relationships.
The pension fund has identified five key investment themes, including digital transformation, health care innovation, and energy modernisation. Co-investments already rose to 9% of TMRS’s total private markets net asset value by 30 June, up from 5% at the start of 2024, with expectations that the allocation could reach nearly 30% over the next five years.
The move aligns TMRS with other US public pensions expanding co-investment programs. For example, California Public Employees’ Retirement System (CalPERS) relaunched its strategy in 2022, projecting savings of $400m per $1bn co-investment over the life of the fund, while California State Teachers’ Retirement System recently announced a climate-focused co-investment partnership with Carlyle AlpInvest.
