Quite a lot of frustration has accumulated over the years for pension funds invested in private equity. Grievances often relate to poorly performing assets and the sluggish pace of distributions. But if nothing else, pension funds have learned some lessons from illiquidity issues triggered by the 2008 financial crisis and are taking full advantage of the equilibrium that has shifted in limited partners' favor.

In recent months two of the country's largest state pension systems, Teacher Retirement System of Texas and New Jersey's State Investment Council, have fine-tuned buyout allocations by devising so-called separately managed accounts, or SMAs. These accounts are distinct from traditional outlays to commingled funds in structure and terms.

It's an elegant solution for both sides -- LPs get better economics and other advantages, and general partners get to lock in capital over the long term. Because pension funds tend to move as a herd, expect to see more of them. It is quite possible that such arrangements will become a fixture, at least on the larger end of the spectrum.

Early in November, the board of Texas' TRS authorized up to $3 billion of commitments each to Apollo Global Management LLC and Kohlberg Kravis Roberts & Co. LP to manage a fund-of-funds master limited partnership. TRS, with about $110 billion in assets, said it followed the "successful model of strategic relationships" it made with BlackRock Inc., J.P. Morgan Chase & Co., Lehman Brothers Inc. and Morgan Stanley in 2008 in global public markets.

In December New Jersey committed up to $1.5 billion to four opportunistic accounts managed by a joint venture with Blackstone Group LP.

The California State Teachers' Retirement System, with $150 billion, is heading in the same direction, as is the California Public Employees' Retirement System, the U.S.' largest, with $225 billion. CalPERS may even give managed accounts greater weight relative to commingled funds, or so the scuttlebutt goes.

CalPERS contracted with Apollo to manage $1.8 billion in two sole managed accounts to invest in leveraged loans. It committed $800 million to Apollo Special Opportunities Managed Account in 2007, which reported a 7% internal rate of return, disclosures indicate. It plowed a further $1 billion in 2008 into a successor account that's showing a 22.4% IRR.

CalPERS declined to comment on these deals, but in 2010 it negotiated a $125 million reduction in management fees following the pay-to-play scandal.

New Jersey's pension fund is the only system to disclose terms to date. The State Investment Council, responsible for about $157.5 billion of assets, extracted a 1% management fee (0% on uninvested capital; 1% on invested capital; and 1% on net asset value after the investment period) for its BX-NJ Tactical Private Equity Opportunities Fund LP with Blackstone. That compares with a typical industry standard of 1.5% to 2%. Carried interest on the JVs is an average 15% versus 20% on Blackstone commingled funds.

Equally important, the accounts provide LPs the ability to better manage illiquidity risks, gain more control over investment decisions and minimize losses through broader diversification.

The New Jersey JV will invest in energy, credit and buyout opportunities. The discretionary accounts will be managed by David Blitzer, co-chair of Blackstone PE; Dwight Scott, head of GSO Capital Partners LP's Houston office; and Louis Salvatore, who runs portfolio management at Blackstone's GSO unit.

As CalSTRS spelled out in minutes of a February board meeting, the accounts "in certain cases" allow a customized approach in which the pension can specify how capital will be deployed across certain asset types, such as mortgage debt, energy and European nonperforming loan opportunities "as they arise."

Given the experiences in 2008, says spokesman Ricardo Duran, the fund is better served by having greater diversification, transparency on performance and ability to work with managers on adjustments once investments have been made. (CalSTRS deferred action in February until some board members could get clarity on certain questions.)

Compared with New Jersey, Texas was less forthcoming, other than to reiterate what other pension funds have said. KKR's Scott Nuttall in a recent earnings call said terms contain "meaningful recycling provisions" that provide for increased assets over time, and added that "the fee give-up is not a meaningful figure."

Considering that it took KKR two years to sign up an SMA, Nuttall concedes "they are hard to get done."

Vyvyan Tenorio writes about private equity for The Deal magazine.