Texas State Board of Education’s finance committee narrowly approved contract extensions for all three hedge fund-of-funds managers of the $29.6 billion Texas Permanent School Fund, Austin, but the full board held off making a final decision.
At a meeting on Thursday, members of the Committee on School Finance/Permanent School Fund argued at length about extending the contracts of Mesirow Advanced Strategies, Blackstone Alternative Asset Management and Grosvenor Capital Management, which expire Aug. 31.
Finance committee members Patricia Hardy and Thomas Ratliff supported a plan to renew contracts for two years for BAAM and Grosvenor Capital, but not for Mesirow, which manages a $400 million hedge fund-of-funds separate account, according to a webcast of the committee meeting.
At issue during the committee meeting was the fund’s need for a third hedge fund-of-funds manager.
BAAM and Grosvenor split management of the balance of PSF’s $3 billion hedge fund portfolio. Each is a strategic partner, co-managing funds at no fee with PSF investment staff and training the internal team to eventually take over management of the portfolio. Fees are assessed for hedge fund-of-funds BAAM and Grosvenor run for the Permanent Fund. The size of each manager’s allocation could not be learned by press time.
Mesirow is not one of the fund’s strategic partners, and Ms. Hardy said she agreed with BAAM and Grosvenor executives who said that two strategic partners were “optimal” for management of the hedge fund portfolio.
In the end, by a 3-2 vote, the finance committee approved contract extensions for all three managers for the period from Sept. 1 to Aug. 31, 2016.
Unusually, the contract extension motion was moved from the consent agenda to the floor for consideration by the full Board of Education at its meeting on Friday.
During the meeting, Mr. Ratliff first moved to amend the committee motion and deny Mesirow a contract extension. After extensive board debate, Mr. Ratliff withdrew his amendment, substituting it with a motion to postpone contract extension decisions until July. The board approved Mr. Ratliff’s second motion, according to the webcast.