Texas Employees Retirement System, Austin, rehired Bank of New York Mellon as global custodian for a six-year contract effective Sept. 1.
Trustees of the $29.4 billion pension fund approved the recommendation of staff to retain BNY Mellon during a board meeting Wednesday, a webcast showed. The global custodian search began in July.
The board also approved hiring TorreyCove Capital Partners as the pension fund's private equity consultant, replacing Mercer Alternatives. TorreyCove's contract also is for six years. The start date has not been determined, said Mary Jane Wardlow, an ERS spokeswoman, in an email. An RFP for the private equity consultant search was posted in August.
Trustees received an update on the pension fund's opportunistic credit portfolio, which was approved in March 2019 but has yet to make a commitment to managers running private lending, real assets/esoteric credit, stressed/distressed and structured products strategies.
Nicholas Maffeo, portfolio manager, said the credit portfolio, which has a 3% allocation of total pension fund assets — about $880 million — will be managed by ERS' hedge fund team in a core-satellite structure.
Trustees approved a tactical plan to commit about 1%, or $300 million, to between up to three managers for the opportunistic credit portfolio by Aug. 31, the end of the pension fund's fiscal year.
Mr. Maffeo said the first credit manager the pension fund's investment staff seeks will be a multistrategy manager "who can rotate between the four credit strategies and provide a core portfolio."
Follow-up commitments will be to smaller, niche-credit-strategy specialists, he said.
Mr. Maffeo did not provide a timeline for possible searches and hires.
In a discussion with trustees about current turbulent markets, CIO C. Thomas Tull said the pension fund has $5 billion of liquid assets, including about $880 million that was pulled from equities as part of derisking the portfolio last year, according to the webcast.
The equity assets were parked in fixed-income funds to pay benefits and to provide liquidity to take advantage of buying opportunities in market downturns like the current situation.
The ERS staff isn't planning big portfolio changes, Mr. Tull stressed, but he noted that "we are selectively putting risk back on" and adding to positions in equities, futures and options.
In response to the coronavirus outbreak, Mr. Tull said the pension fund has stopped "virtually all travel" and investment staffers now are fully equipped to perform all functions remotely.
Employees were forced to do a trial run for remote working a few weeks ago when ERS' headquarters lost power for a whole day, Mr. Tull told trustees, noting that the investment operations went forward without a hitch.
