In two separate announcements Kohlberg Kravis Roberts & Co. L.P. and Apollo Global Management LLC each said they had been selected by the Teacher Retirement System of Texas (TRS) to manage $3 billion in commitments.
In KKR’s case, the firm will manage $3 billion of TRS capital across a variety of private markets' asset classes. The strategic partnership includes a flexible, discretionary arrangement encompassing $3 billion of long-term capital committed in 2011 ($1 billion to date) and beyond.
According to the release, “it has meaningful recycling provisions for those commitments and provides wide latitude for the opportunistic allocation of capital in different market environments. It takes advantage of the long-term nature of the TRS portfolio to capitalize on market opportunities globally and is designed to deliver an attractive risk reward profile to TRS in a widely diversified, global portfolio. It is a customized incentive-based arrangement which seeks to allow the portfolio to capitalize on the best ideas of KKR. The partnership also emphasizes significant idea sharing between the staff at Texas Teachers and the KKR team around the world.”
Commenting on the partnership, Henry Kravis and George Roberts, co-founders and co-CEOs of KKR, said in statement, "We appreciate the innovative and market-leading approach of TRS, and we are very excited about this strategic partnership. It reflects the deepening of a longstanding relationship between TRS and KKR, and we look forward to working with the TRS team in the years ahead."
Meanwhile, Apollo said it expects to manage $3 billion in commitments from TRS among various fund and customized investment programs across its integrated platform.
According to its release, “The elements of the strategic partnership include: $3 billion of long-term committed capital for new funds and investment strategies; significant recycle provisions for the commitments; discretionary deployment of the capital within agreed upon product baskets; customized fee and priority return provisions to recognize that the capital will be deployed across numerous product categories over an extended period; considerable risk mitigation for TRS as investments across multiple product categories will be made through a single partnership; and significant collaboration between Apollo’s investment teams and the Private Markets staff at TRS.”
“This strategic partnership marks a new milestone in our successful long-term relationship with Apollo,” Steve LeBlanc, a senior managing director of TRS, said in a statement. “We believe this customized framework will allow the Trust to take advantage of opportunities across a variety of investment strategies and market conditions. We look forward to continuing to work with Apollo and their best-in-class investment team to further enhance returns for our members.”