Texas Teacher Retirement System, Austin, is developing a strategic investment plan for oil and energy this year, T. Britton Harris IV, chief investment officer, told trustees at a meeting Wednesday.
Mr. Harris said the recent decline in the price of oil has created substantial dislocation in the industry, especially with regard to financing, offering good investment opportunities at “attractive prices,” a webcast of the meeting showed.
“If you want to earn an 8% to 10% return, you can do it through this dislocated sector, especially relative to six months ago,” Mr. Harris said, adding the oil and energy sector is one of the TRS investment department's five best investment ideas for 2015.
Mr. Harris estimated about $100 billion of credit likely will be in play this year as a result of a lack of ready financing for the oil/energy sector, according to the webcast.
The $132 billion pension fund has “a lot of money ready to take advantage of this dislocation,” Mr. Harris said, without saying how much the pension fund intends to invest.
Juliana Fernandez Helton, TRS spokeswoman, said: “TRS does not speculate on potential future investment amounts,” in an e-mailed response to a request for the size of future oil and energy investments.
Texas TRS had a total of $2.6 billion or about 2% of the total portfolio as of Sept. 30 invested in a dedicated energy and natural resources category. The pension fund's target allocation to the sector is 3%, and the investment staff has an investment range of zero to 8% in which to invest.
Mr. Harris said during the meeting that the breakdown of the dedicated portfolio is about 75% equities and 25% credit. He said the pension fund has additional oil and energy investments within other asset classes in the portfolio; he did not say what the total of those investments was.
A strategic investment plan should be ready for implementation in about a month, Mr. Harris told trustees during the meeting webcast. He did not provide details beyond noting the investment team will use a “two-phase approach” to invest in both credit and equity.
