Texas Business reports:  The Teacher Retirement System of Texas (TRS) selected Kohlberg Kravis Roberts & Co. LP to manage $3 billion of TRS' capital across a variety of private markets' asset classes.

The implementation of the strategic partnership between TRS and KKR is subject to the negotiation of definitive documentation and receipt of any requisite approvals.

The KKR strategic partnership with Texas Teachers includes a flexible, discretionary arrangement encompassing $3 billion of long term capital committed in 2011 ($1 billion to date) and beyond.

Importantly, 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, according to KKR.

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.

“We appreciate the innovative and market-leading approach of TRS, and we are very excited about this strategic partnership,” said a statement issued by KKR. “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.”

“Today's decision is the culmination of a multiple year effort to create a private markets partnership platform that will support the needs of TRS and its beneficiaries,” said Steve LeBlanc, senior managing director, external private markets at TRS in a prepared statement. “Over the last three years, we have implemented similar partnerships in public markets, and they have been very successful. These strategic partnerships enable us to work closely with a small group of top tier managers and they allow us to take advantage of the best global investment opportunities. We selected KKR because the firm has a long history of successful investing and it has demonstrated the type of innovative thinking that will ensure we have access to the right opportunities at the right time.”

TRS delivers retirement and related benefits authorized by the Texas legislature, and manages   $107 billion trust fund established to finance member benefits. More than 1.3 million public education and higher education employees and retirees participate in the system

Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a an investment firm with $58.7 billion in assets under management as of September 30, 2011. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes.