Review Potential Changes to the Long-Term Strategic Asset Allocation Plan
of the Permanent School Fund
May 20, 2010
COMMITTEE OF THE FULL BOARD: DISCUSSION
STATE BOARD OF EDUCATION: NO ACTION
SUMMARY: This item provides an opportunity for the committee to review potential changes to the current long-term strategic asset allocation plan of the Permanent School Fund.
BOARD RESPONSE: None.
PREVIOUS BOARD ACTION: In July 2006, the board voted to revise the asset allocation with a 24% allocation to large cap domestic equities, 7% to small/mid cap domestic equities, 14% in large cap international equities, 4% in small/mid cap international equities, 4% in emerging markets, 19% in domestic fixed income, 6% in real estate, 6% in real return, 10% in absolute return, and 6% in private equity.
FUTURE ACTION EXPECTED: None.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: One of the primary duties of the board in its oversight of the Permanent School Fund is to establish the long-term asset allocation policy of the Fund. The allocation of the Fund’s assets between various classes of securities will explain more than 90% of the Fund’s variation of returns. The overall risk assumed by the Fund is managed through the diversification of asset classes in which the Fund is invested.
FISCAL IMPACT: The distribution of the Permanent School Fund is projected to be
$60.7 billion for fiscal year 2010. The distribution earned by the Fund is affected by the asset allocation of the Fund and the capital market environment.
PUBLIC AND STUDENT BENEFIT: The distribution of the Permanent School Fund will flow to the school districts and reduce the tax burden to the public and the state of Texas.
PROCEDURAL AND REPORTING IMPLICATIONS: Not applicable.
PUBLIC COMMENTS: None.
ALTERNATIVES: No alternative actions are proposed regarding this item.
OTHER COMMENTS AND RELATED ISSUES: None.
Commissioner of Education
Staff Member Responsible:
Holland Timmins, Executive Administrator
and Chief Investment Officer of the
Texas Permanent School Fund