The Texas Permanent School Fund has co-invested in the $2.3bn (€2.2bn) purchase of interests in 40 real estate funds from a “major public pension fund”.

The US institution declined to say whether the deal related to the recent sale of a $3bn portfolio of funds by the California Public Employees’ Retirement System (CalPERS).

The $50m co-investment, confirmed during a Texas Permanent board meeting, was made with Strategic Partners, a specialist Blackstone subsidiary.

Strategic Partners recently acquired interests in 43 funds from CalPERS, the largest-ever transaction of its kind.

Texas Permanent said the portfolio it co-invested in comprised 40 funds with approximately 400 underlying assets.

It said the projected return on the investment was roughly 20%, using leverage of 33%.

Texas Permanent has also approved a $75m allocation to a real estate debt fund managed by Mesa West, according to a board meeting document.

The investment in Mesa West Real Estate Income Fund IV follows previous investments with the manager, including Mesa West Real Estate Income Fund II, which produced a net return of 13%.

Mesa West is seeking to raise $750m for its latest fund and aiming to generate returns of 9-11%.

The fund will originate and service a portfolio of first mortgages.

Each of the properties in the fund must have a value-add component.

The loans are structured as floating-rate debt with a spread over LIBOR of 500-600 basis points.

Most of the loan-to-value ratios for the commingled fund portfolio will be in the range of 65% to 70%.