Jase Auby, CIO of the Texas Teacher Retirement System, Austin, speaking on a panel Tuesday at the Milken Institute Global Conference thanked the private equity industry for the “incredible” 55.1% return for the year ended June 30, but he added, “now is the time that we want our capital back.”

The $193.1 billion pension fund currently has 16.3% invested in private equity, just above its 14% target allocation.

And some 54% of its private equity general partners are raising or planning to raise new funds because they are already low on capital, Mr. Auby said. “This will be a difficult thing to work through,” he added.

Another speaker on the panel, Andrew Weinberg, founder, managing partner and CEO of Brightstar Capital Partners said continuation funds — new funds created by using existing funds to buy portfolio companies the manager wants to continue to own — is a growing trend.

Mr. Weinberg said continuation funds are a good way to provide investors enhanced private equity returns in a low-interest-rate environment.

“If you love an asset … why would you let it go?” he asked.

Mr. Auby responded that continuation funds can give rise to conflicts of interest and mismatches.

Texas Teachers is developing the in-house ability to value individual portfolio companies to verify that the price being set in the sale of a portfolio company from one of the manager’s funds to a new fund is fair to investors.

Continuation funds could exacerbate a “big logjam” in private equity Texas Teachers is expecting in 2022, Mr. Auby said.

“How are we going to invest in your next fund if you’re holding capital in your continuation fund?” he added.