Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. PENSION FUNDS
May 27, 2020 01:44 PM

Diversity and liquidity help Texas Teachers manage through crisis

Christine Williamson
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Jase Auby
    Photo: Dan Herron
    Jase Auby

    The global impact of COVID-19 on global markets tested the mettle of the investment approach of the Teacher Retirement System of Texas, and the portfolio performed as expected, thanks to a high degree of diversification and ready liquidity, said Jase Auby, CIO of the Austin-based pension fund in an interview with Pensions & Investments.

    Assets fell to an estimated $148 billion in the quarter ended March 31 from $163 billion as of Dec. 31 with an investment return of -8.3%, but the decline hasn't affected the pension fund's ability to meet benefit payments and to invest in new investment opportunities at bargain prices during rough market conditions.

    "We were positioned pretty neutrally prior to the crisis, and we have a heavy emphasis on maintaining that neutral stance by focusing on rebalancing," Mr. Auby said.

    When the coronavirus crisis hit global markets in February, the first thing the TRS investment team did was increase the pension fund's cash on hand to 3% from 2% while adding leverage by the same amount to maintain steady portfolio exposure, Mr. Auby said.

    TRS has a zero to 10% (4% neutral) net leverage allocation within its portfolio. TRS sold bonds to buy public equities to rebalance the global stock portfolio to its 40% target allocation.

    TRS' board raised the strategic asset allocation to long-dated U.S. Treasury bonds (19-year duration) to 16% from 11% in the fall of 2019, Mr. Auby said, noting that during the early phase of the coronavirus crisis "it was all about selling Treasuries. Prices were good during the coronavirus crisis for long-dated Treasury bonds."

    See more of P&I's coverage of the coronavirus

    To find fresh investment opportunities, Mr. Auby said the investment team may make to an overweight allocation to public equity especially in value and small-cap strategies given the "historic" decline in the market pricing of these securities and their likely rebound as markets correct. Actively managed strategies might also outperform once market volatility returns to more normal levels and might be another area of increased investment.

    TRS may also tap its liquidity reserve to invest in credit, which "usually is near the top of everyone's list in a crisis," given low prices for both investment-grade and high-yield bonds as other investors deleverage their portfolios, Mr. Auby said.

    Some of the pension fund's existing hedge fund managers that had been closed to additional investments prior to the pandemic crisis have reopened their strategies, and TRS topped up their mandates.

    TRS investment officers also are analyzing the possible negative and positive long-term implications of the COVID-19 pandemic on investment sectors, including real estate, travel and leisure and health care. Mr. Auby said the potential retreat from globalization might accelerate in the aftermath of the coronavirus and create new geopolitical issues for investors.

    Another important exercise for TRS' investment management division was to survey the fund's private market money managers, Mr. Auby said, noting "we really needed to know what our managers were doing in their portfolios. We had to be sure they could provide rescue capital to companies in their portfolios if necessary, and we urged our managers to be very transparent."

    TRS received responses from every alternative investment manager and "didn't get any surprise answers," Mr. Auby said.

    Since work-from-home mandates were instituted in Texas, the pension fund's internal investment team has managed $148 billion from their homes in and around Austin with just a slight slowdown in trading in U.S. Treasuries, Mr. Auby said, while public equities were "more easily traded" without hitches.

    Like every other asset owner and money manager around the world, Texas Teachers still is evaluating its working arrangements when COVID-19 restrictions are lifted.

    "Everyone here is so surprised that working from home has gone so well. There are many clear advantages. I feel more productive than ever, but I am missing seeing people and just saying hi," Mr. Auby said.

    He warned, however, that "some things may start to fray. Meeting remotely has worked well, but it's much easier to mentor and develop the talents of junior employees or to foster continuous training and improvement of other employees when you're side by side."

    Texas Teachers has hired several new employees after a successful remote recruiting process during the stay-at-home lockdown period, Mr. Auby said.

    Related Articles
    Texas Teachers gets A-plus for execution of succession plan
    Texas Teachers' emerging managers program beats benchmarks
    Texas Teachers brings more global equity in-house to seize alpha
    Recommended for You
    Dutch_Flag_i.jpg
    Dutch ABP pension fund to raise benefits 2.39%
    terminated_stamp_1550-main_i.jpg
    Contra Costa County terminating Jackson Square Partners
    Chicago-Parks-District_i.jpg
    Chicago Park Employees drops Denali Advisors
    Strong Demand Drivers Underpin Private Credit
    Sponsored Content: Strong Demand Drivers Underpin Private Credit

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit