Texas Teacher Retirement System sees assets drop 1.2% for quarter

(Updated on 9/14/2012)

Texas Teacher Retirement System, Austin, experienced a 1.2% decline in assets in the quarter ended June 30 to $108.9 billion, according to a performance report presented to trustees at a meeting Thursday, by the board's consultant, Hewitt EnnisKnupp.

The asset decline was the result of the pension fund's -0.41% return in the second quarter, resulting in investment losses of $468.2 million coupled with $900 million of benefit payments and withdrawals. The pension fund's policy benchmark returned 0.03% in the quarter.

Over longer time periods, the pension fund's performance was universally positive. For periods ended June 30, the fund return year-to-date was 6.45%, compared with the benchmark 5.94%; one year, fund 2.68%, benchmark 4.14%; three years, fund 13.17%, benchmark 12.51%; five years, fund 2.12%, benchmark 2.35%; and 10 years, fund 6.69%, benchmark, 6.6%. Multiyear returns are annualized.

T. Britton Harris IV, Texas Teachers' chief investment officer, analyzed the pension fund's returns over a longer time period for the board during his performance report, noting that the fund's assets have increased 500% from $18 billion as of June 30, 1987. The pension fund's annualized return over the 25-year period was 8.6%.

In other news from Thursday's board meeting, Mr. Harris introduced Vaughn Brock, who will join the teacher fund on Sept. 17 as director of energy and natural resources. ENR investments, which total $3 billion, have been spun out into a separate investment strategy and will be expanded over time, Mr. Harris told the board.

Mr. Brock's ENR portfolio will include energy and resources investments across all TRS asset allocations and will include public and private entities, said Howard J. Goldman, a TRS spokesman, in an e-mail.

Mr. Brock told the board that he has been teaching at the University of Texas for the past several years.

The board also approved minutes of its July 20 meeting, which revealed that the pension fund's executive director, Brian Guthrie, was authorized to extend the contract of State Street Bank, the fund's master custodian and securities lending agent, for two additional years, and the contract of the fund's actuary, Gabriel, Roeder, Smith & Co., for an additional year, pending successful negotiations. The end date for each contract could not be learned.