Texas TRS · Teacher Retirement System of Texas · $233B
Texas Teachers' asset mix adds up to 104% on purpose
Texas TRS runs $233.5 billion for the state's teachers on a policy portfolio whose asset-class targets sum to 104%, not 100%. The extra four points are financed by a line in the policy called Asset Allocation Leverage, targeted at -6% and benchmarked to SOFR plus 26 basis points. The point of the structure is that its long Treasuries, inflation-linked bonds and risk parity sleeves do not have to be paid for by selling equities.
Key numbers, and what they mean
104%
What its asset-class targets sum to. TRS says it plainly in its own materials: the allocation sums to 104% and therefore has leverage at the asset allocation level.
-6%
The policy weight of its borrowing, with its own range and its own benchmark of SOFR plus 26 basis points. Leverage that carries a target and a cost can be measured, and can be judged wrong.
14.4%
The trust's return for the year to March 2026 against a 13.1% benchmark. Over 20 years it has returned 7.1% a year against 6.5%.
77.5%
Funded ratio at August 2025, with a $64.9 billion shortfall and a 7.00% assumed return. The leverage is not free money. It is how an underfunded plan buys diversification without giving up growth.
Investment exposure, March 2026
Global equity56.7%
Stable value20.8%
Real return19.9%
Risk parity5.3%
Investment exposure sums to 102.7% against a 104% target, financed by a borrowing line of -5.8%. Cash is a further 3.1%. Private equity sits inside global equity at 13.9%.
The read-through
From the report
Takeaway: how to apply it to a portfolio
The policy statement carries a line called Asset Allocation Leverage with a target of -6%, a range, and its own benchmark of SOFR plus 26 basis points.
If you use borrowed money, name it, size it and give it a rate to beat. The dangerous kind is the leverage buried inside a fund or a structured product, because nobody is monitoring it until the moment it matters.
In July 2024 TRS cut long Treasuries from 16% to 10% and added 6% in inflation-linked bonds, without cutting its 57% global equity target.
Most portfolios are under-diversified because every defensive dollar has to be funded by selling a growth dollar. Borrowing removes that constraint. Whether you can copy it depends on whether you can actually borrow cheaply and survive a margin call, so treat it as a test rather than a template.
Actual exposure was 102.7% against the 104% target in March 2026 and actual borrowing -5.8% against -6%, while its reported investment expense jumped once accounting rules required interest on repurchase agreements to be counted as an expense.
Leverage costs more than its interest rate. It drifts away from policy, and it inflates the expense ratio you get judged on. Compare a levered portfolio against its own levered benchmark, never against an unlevered peer.
The Argus lensTRS also holds $34.1 billion of co-investments alongside its managers, about 43% of its private book at the end of 2025, largely to avoid paying full fund economics twice. Whether a co-investment is really priced better than the fund beside it is a question the documents answer, and we answer it.
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About the source
The Texas TRS Investment Policy Statement effective 1 May 2026 sets out the 104% allocation and the Asset Allocation Leverage line. Trust value, returns and actual weights are from its Investment Management Committee book of July 2026, with data as of 31 March 2026. The funded ratio and assumed return are from its annual report for the year ended 31 August 2025.