Decision on Absolute Return Investments
November 16, 2012
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: ACTION
SUMMARY: This item provides an opportunity for the committee and board to review the current allocations within the absolute return asset class and consider rebalancing of assets. The board will consider termination of absolute return fund of fund managers, contract extensions and ratification of fees, terms and responsibilities where appropriate.
STATUTORY AUTHORITY: Texas Constitution, Article VII, §5(f).
PREVIOUS BOARD ACTION: At the July 2012 meeting, the board approved the termination of K2 Advisors effective immediately and split the funds between the strategic relationship structures at Grosvenor Capital Management LP and Blackstone Alternative Asset Management at amounts deemed appropriate by internal staff, where in no event will any of the firms receive less than a 1/3 allocation and no more than 2/3 allocation of funds. Staff was directed to discuss and renegotiate with all remaining Fund of Funds managers their respective fee structures and that no contract shall be issued for a period longer than two years. Staff was also directed to continue to move forward with the absolute return strategic relationship that is being developed with Grosvenor Capital Management LP and Blackstone Alternative Asset Management. Existing contracts that expire August 31, 2012, may have their contracts extended sufficiently to allow renegotiations of fees, terms and responsibilities. All contract changes are to be ratified by the State Board of Education at its next meeting.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: In July 2006, the board approved a strategic asset allocation plan which included a 10% allocation to absolute return.
FISCAL IMPACT: The distribution of the Permanent School Fund is projected to be $2.0 billion during the 2012-2013 biennium.
PROCEDURAL AND REPORTING IMPLICATIONS: Not applicable.
PUBLIC COMMENTS: None.
OTHER COMMENTS AND RELATED ISSUES: None.
Michael L. Williams
Commissioner of Education
Staff Member Responsible:
Holland Timmins, Executive Administrator
and Chief Investment Officer of the
Texas Permanent School Fund