Blackstone Group LP, the world’s largest private-equity firm, passed on a fundraising deal with the Teacher Retirement System of Texas that sent $3 billion apiece to KKR & Co. and Apollo Global Management LLC, Chairman Stephen Schwarzman said.
“We were asked to participate,” Schwarzman said today in an interview on Bloomberg Television’s “InBusiness.” “But for us in that particular case, it didn’t make much sense.”
Texas Teachers, which manages more than $107 billion on behalf of 1.3 million employees and retirees, announced the agreements with KKR and Apollo earlier this month. The pension’s cash won’t go into a single fund at the firms. Instead, it will be placed in separately managed accounts that the pension system will oversee in partnership with each firm, giving Texas more options on how its money is invested.
In return, Texas Teachers agreed to allow the firms to reinvest a portion of Texas’s profits back into the funds. Other private-equity firms, including TPG Capital and Carlyle Group, have either set up SMAs or are in the process of doing so.
Schwarzman said the Texas deal was “geared basically to help, from the general partner perspective, those companies expand” into areas such as hedge funds and real estate. “The issue for us at Blackstone is we were already in those businesses.”
Texas Teachers has committed money to New York-based Blackstone since the KKR and Apollo transactions were announced, Schwarzman said, adding “we have plans to be working with them.”
‘So Much Money’
Asked whether Blackstone’s plans with Texas Teachers involve a separately managed account, Schwarzman said, “We may have something in that area as well.”
KKR took almost a year to agree to the terms of the Texas Teachers commitment, highlighting how big private-equity managers are being squeezed as they seek to keep cash flowing into their funds. The shift, which began when the financial crisis of 2008 slowed private-equity fundraising, means institutions such as Texas Teachers can bargain for lower management fees and greater investment options.