Employees Retirement System of Texas (ERS) will have to invest over $2bn (€1.6bn) in infrastructure over the next five years to enable it to achieve its target allocation for the asset class.
According to a board meeting report, the pension fund’s consultant Pavilion Alternatives Group said it will need to invest $470m annually to reach its 7% target by 2023.
The $28.5bn pension fund had $863m invested in infrastructure at the end of 2017, representing 3% of total assets.
Pavilion recommends making additional commitments to European infrastructure funds and adding at least one new Europe-based manager to its roster, since only 10% of the pension fund’s infrastructure portfolio is currently invested in the region.
The largest concentration is in the US, which makes up 45% of the existing infrastructure portfolio.
Texas ERS, which invests across core, value-added and opportunistic strategies, is under-allocated to core assets, at 6% versus its target of 25%. Pavilion recommends committing more capital to core strategies.
The pension fund will seek to invest in a wide variety of infrastructure assets, including renewables, telecoms, utilities, midstream and traditional power, shipping, energy and transportation.