Investment officers of the $133.2 billion Teacher Retirement System of Texas took to the streets of Austin to tag a wall with their demand for fairer hedge fund fees.
Such a public demand for more hedge fund alpha through lower fees might well be the first by an institutional investor anywhere in the world, sources said.
The investment team, which manages TRS' $10.8 billion hedge fund portfolio, dressed up as punks, armed themselves with plenty of spray paint and emblazoned the public graffiti wall in Austin's open air Hope Gallery with three slogans: “1 or 30,” “share the alpha” and “for the teachers.”
The slogans refer to the fund's “1 or 30” fee structure, which guarantees the investor will always pay a 1% management fee to a hedge fund, regardless of performance, but will never pay for more than 30% of the gross alpha provided annually by the fund. A quick flip of the formula emphasizes the 70% of alpha that TRS retains for the educators' pension fund.
“Holiday cards are a big thing at TRS and we come up with a new theme every year that's usually connected to teachers, school and benefits,” said Dale West, senior managing director and head of external public markets. Past themes featured the high school prom photos of team members and another re-enacted a school bus ride.
“Our chief investment officer, (T. Britton) Britt Harris (IV), likes to tell us that TRS is a capitalist Robin Hood who should take from Wall Street and give it back for the benefit of Texas teachers. That idea was in our minds when we came up with the idea for this year's card,” Mr. West said.
The card's message was simple: “We're just a bunch of punks looking for trouble … and alpha.”
The team's holiday card was sent to all of the managers of long-only and hedge fund strategies in the public markets' portfolio, as well as to consultants and other department contacts. This year's vivid message about sharing alpha resulted in “a lot of positive feedback,” said Mr. West.