The Texas Permanent School Fund has approved a $75m (€71.2m) commitment to DRA Advisors’ ninth Growth and Income fund.
DRA is planning to invest much of the capital for Fund IX in secondary and tertiary US property markets.
The manager identifies opportunities with regional and local operating partners, which typically put in 5-20% of equity per transaction.
DRA is targeting 13-15% net IRRs for Fund IX, including a 9-11% income return on all transactions.
The real estate manager is looking to invest in a diversified portfolio that includes office, industrial, retail and apartments.
DRA looks to find assets where the manager can increase revenue by several strategies including increasing rents, improved leasing and renovation or expansion.
The total capital raise on the fund so far has been $790m from 43 investors.
The largest single investor in the fund committed a total of $100m.
The pension fund made the commitment based on the recommendation of Courtland Partners, which indicated that its pension fund clients had to date committed $750m to the fund.
These allocations make up 50% of the $1.5bn planned capital raise.
Courtland believes DRA has been a strong performer in its previous funds, even during the global financial crisis.
During the pension fund’s board meeting, the consultant said the manager’s performance for DRA Growth and Income V was a 5.1% net IRR.
Texas Permanent has changed its investment policy for co-investments and real estate secondaries.
In the past, the pension fund was only able to invest with an existing real estate manager.
The pension fund is now able to do this with a manager that it has no relationship with.
Courtland said this could open up the number of transactions the pension fund can invest in in the future.
Texas Permanent will have investment discretion over the strategy, while Courtland must approve each transaction.
