Texas to peek over shoulders of public funds
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • KKR lifts out 3 to focus on clean energy infrastructure
      Richard Johnson
      Appian Capital Advisory adds global investor relations head
      Alternative investment funds faced liquidity squeezes in COVID-19 crisis and 2019
      CI Financial launches global real estate, infrastructure joint venture
    • Callan brings on 2 executives
      Hub International agrees to buy Plan Sponsor Consultants
      Aon names public markets solution leader
      Deloitte to acquire Sydney-based consulting firm Rice Warner
    • Alternative investment funds faced liquidity squeezes in COVID-19 crisis and 2019
      Jerome Powell, chairman of the Federal Reserve, listens during a Senate Banking Committee hearing in Washington on Dec. 1, 2020
      Fed saw some time before taper conditions met – minutes
      International Monetary Fund and World Bank spring meetings signage at the IMF headquarters in Washington
      IMF upgrades global growth forecast, warns of diverging recoveries
      A cashier standing behind a protective barrier assists a customer at a Peter Harris Clothes store in Latham, N.Y.
      Job growth tops 900,000 in March as hiring broadens
    • Pentegra launches pooled employer plan
      Teresa Hassara
      Ascensus taps MassMutual alum as new FuturePlan president
      Economic Group Pension Services scoops up third-party administrator
      OregonSaves gathers $100 million in assets
    • Shoppers wear protective masks while visiting an Apple Inc. store at George Street in Sydney, Australia, on June 24, 2020.
      Apple backs SEC mandate on climate disclosure
      Emissions rise from the Kentucky Utilities Co. Ghent generating station in Ghent, Ky.
      Investors, businesses call for ambitious emissions goals
      Signage for Temasek Holdings Pte. is displayed during a news conference following the company's annual review in Singapore
      Temasek, BlackRock partner to launch carbon-cutting funds
      New York state pension fund limits oil sands investments
    • Ken Griffin
      Ken Griffin donates $5 million to give Miami students internet
      New book culls institutional wisdom from podcast series
      Fearless Girl
      SSGA’s Fearless Girl statue now shattering glass ceiling
      Tangen video
      Norges chief dons chef’s hat to boost employees’ spirits
    • Hedge funds post best first-quarter return since 2000
      Jason Kephart
      Managers see good times ahead in 2021
      Jev Mehmet, CEO of Brevan Howard's Coremont unit
      Brevan Howard runs $50 billion unit like BlackRock’s Aladdin
      A sign outside a Credit Suisse Group bank branch in Murten, Switzerland
      Credit Suisse, Nomura slump as banks tally Archegos damage
    • Mirova adds proxy voting and engagement leader
      S&P Global holds fast on New Jersey’s long-term debt rating
      New York University revamps options for 5 DC plans
    • Mirova adds proxy voting and engagement leader
      Erick Bronner
      Palladium Equity Partners picks new head of fundraising and investor relations
      The Euro sculpture illuminated outside the Eurotower, the former headquarters of the European Central Bank in Frankfurt on Dec. 15, 2020
      European manager AUM rises to record $12.7 trillion in 2020
      Lydia Wu
      Barings chooses head of Greater China distribution
    • Kansas City Employees adopts global strategy with small-cap swing
      Michael C. Viteri
      Arizona appoints new CIO
      A £10 sterling bank note with a pound coin and a ballpoint pen, with focus on the word 'pension.'
      U.K. defined benefit plans’ surplus surges in March
      Columbia University professor Takatoshi Ito
      GPIF treads water as ESG picks up pace
    • Mirova adds proxy voting and engagement leader
      Erick Bronner
      Palladium Equity Partners picks new head of fundraising and investor relations
      Callan brings on 2 executives
      Michael C. Viteri
      Arizona appoints new CIO
    • Bills of euro, dollar and pound currencies, among others
      Ardian closes latest buyout fund at $8.8 billion
      Hand typing on stationary iPhone at an office reception desk
      Private equity’s taste for tech spurs $80 billion deal spree
      Vista Equity promotes 2 to leadership roles on 2 funds
      Azimut takes minority stake in HighPost
    • CalSTRS indutrial property
      Investors hungry for industrial properties
      Tim Wang
      GLP names co-president of logistics, industrial real estate for China
      Frank Forster
      StepStone Real Estate adds managing director for Europe
      Christine Iacoucci
      BentallGreenOak promotes from within to fill Canadian CIO role
    • Andy Schreiner
      New PEPs targeting firms without retirement plans
      Jackie Walorski
      Contribution catch-up for caregivers gaining favor
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Neal and Brady
      Retirement security could be only issue both sides accept
    • Corporate pension contributions
      Eddy Awards 2021
      COVID-19: One year in
      Charging Bull, sometimes referred to as the Wall Street Bull or the Bowling Green Bull, a bronze sculpture that stands on Broadway just north of Bowling Green in the Financial District of New York City
      Top-performing managers Q4 2020
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Insurer Phoenix chooses Barings for real estate debt allocation
      Texas Employees discloses $246 million in commitments
      New York University revamps options for 5 DC plans
      Riverside County adds BlackRock bond fund, drops Templeton fund
    • Insurer Phoenix chooses Barings for real estate debt allocation
      Texas Employees discloses $246 million in commitments
      New York University revamps options for 5 DC plans
      Riverside County adds BlackRock bond fund, drops Templeton fund
    • Passive Investment Management Services
      Active Extended Global Credit Manager Search
      Actuarial Services
      Investment Management Services
    • Managed account adoption stalls in 2020
      U.S. bonds have worst quarterly return since 1981
      Stable value retains edge over money market funds
      Taiwan Semiconductor’s No. 1 in the emerging markets book
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • CalPERS cartoon
      Urgency underscores CalPERS' search for a CIO
      Multiemployer plans cartoon
      Money — but no fixes — for multiemployer plans
      Vaccination cartoon
      Rallying to meet the ongoing COVID-19 challenge
      Tesla cartoon
      Don’t confuse wealth creation with retirement saving
    • Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
      COVID-19 Makes LP Portfolio Management More Important Than Ever
      China: the outlook is bright for longer-term investors
      Finding Differentiation in Securitized Assets
    • Greg Shea and Steven Kindred
      Commentary: The solution for yield-seeking allocators may be hiding in plain sight
      Jim Park
      Commentary: Asian Americans, Pacific Islanders face ‘bamboo ceiling’ in money management
      Jared Gross
      Commentary: Anchors and allocations – breaking the grip of 60/40
      Peter Marber
      Commentary: Is it time for an emerging markets rally?
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • P&I Content Solutions
      Research for Institutional Money Management
      P&I Content Solutions
      Top questions for institutional investors
      Sponsored Content By Newton Investment Management
      Growth and Innovation in Emerging Markets
      P&I Content Solutions
      In Challenging Markets, Systematic Global Macro Strategies Could Hold Opportunity
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      1:23
      The passive fixed-income glut
      watch video
      1:38
      Is it time for DC plans to embrace private equity?
      watch video
      5:39
      The coronavirus pandemic: One year later
      watch video
      0:45
      Private funds weathered 2020 turmoil
    • Understanding the PEP Evolution
      Divest or engage?
      New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Innovations in DC: Helping supercharge retirement outcomes
    • POLL: The Biden infrastructure plan
      POLL: Retirement income solutions
      POLL: Working after the pandemic
      POLL: The year ahead for the 1,000 largest U.S. retirement funds
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • Managed account adoption stalls in 2020
      U.S. bonds have worst quarterly return since 1981
  • Events
    • Conferences
    • Webinars
    • DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Understanding the PEP Evolution
      Divest or engage?
      New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Innovations in DC: Helping supercharge retirement outcomes
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. Legislation
June 24, 2019 12:00 AM

Texas to peek over shoulders of public funds

Christine Williamson
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    James Murphy wants the state to be able to easily compare public funds’ investment health.

    In what may be a windfall for investment consultants, a new law requires Texas public pension funds with assets greater than $30 million to hire outside firms to evaluate the efficacy of investment activities of the fund and suggest improvements in a report to the Texas Pension Review Board, Austin.

    On June 10, Texas Gov. Greg Abbott signed Senate Bill 322, mandating public pension funds to provide "comprehensive analysis of the retirement system's investment process that covers all asset classes," according to the text of the law.

    Texas public funds will have until June 1, 2020, to submit their first evaluation reports. Thereafter, evaluation reports must be filed every three years for plans with more than $100 million in assets and every six years for plans with assets between $30 million and $100 million. Plans with less than $30 million are exempt from the reporting requirement.

    State Rep. James Murphy said he and bill co-sponsor, Sen. Joan Huffman, introduced the bill to make it easier for the Texas Pension Review Board to make apples-to-apples comparisons of the investment health of the public pension plans it oversees.

    Part of their motivation was to make sure that the Pension Review Board has adequate data from each pension fund to identify plans that might be in trouble with regard to investment performance or funded status, Mr. Murphy said.

    Mr. Murphy said constituents and taxpayers expressed concern to him about the status of Texas public plans between legislative sessions (Texas has a biennial schedule) after reform legislation was passed in the 2017 session to shore up the $2.1 billion Dallas Police & Fire Pension System and the $4.2 billion Houston Firefighters' Relief and Retirement Fund, the $3 billion Houston Municipal Employees Pension System and the $5.5 billion Houston Police Officers' Pension System.

    "Investment performance and benefit structures can become uncoupled leading to problems," Mr. Murphy said, noting that pension funds may be able to "self-correct" deficiencies using the suggestions for improvement provided by the external reviewers negating "the need for big brother to step in."

    Observers noted that Texas is home to a high number of small public pension funds and legislators likely are taking a protective stance with the legislation.

    Of the 99 public pension funds in the state, 41 have assets of more than $100 million and 24 have assets between $30 million and $100 million.

    "Texas has a very large number of very small pension funds, and legislators are making sure these funds are reporting information on their funding and investment policies so action can be taken if there are problems," said Timothy Lee, executive director of the Texas Retired Teachers Association, Austin.


    Teeth of the law

    "Requiring these plans to submit their evaluation reports to the (Texas) Pension Review Board may help identify potential problems," Mr. Lee said, noting that "the teeth of the law will be in the hands of the decision-makers, including the governor, lieutenant governor and legislators," who act, if necessary, based on the results of fund evaluations.

    The review board will compile and summarize the reports of the pension funds before passing the information on to state officials.

    Mr. Murphy said the Legislature is "trying to be careful about putting its finger on the scale because it's definitely a gray area" regarding local control of public pension funds and state intervention.

    He said the program will be assessed between legislative sessions and legislation may be introduced to codify actions the state might take based on pension fund evaluations.

    SB 322 requires Texas public funds to hire external firms experienced in evaluating institutional investment practices to review the system's investment practices, policies and performance in the previous year and to create a report with recommendations for improvement to be submitted to the Texas Pension Review Board no later than June 1 after the fund's prior fiscal year-end.

    The law permits a pension system to engage a firm with which it already has a relationship, such as an investment consultant, to prepare the fund evaluation, but it forbids hiring firms that directly or indirectly manage money for the fund.

    Some Texas public pension funds, including the Austin-based $145.4 billion Teacher Retirement System of Texas and the $2.7 billion City of Austin Employees' Retirement System, said they might turn to their existing investment consultants to prepare fund evaluation reports.

    Among the specific areas for review are the system's strategic investment plan; detailed analysis of the plan's asset allocation, including the process for determining target allocations; expected risk and return; the method for selection and valuation of alternative and illiquid investment strategies; and the appropriateness of investment fees and commissions.

    The Texas Pension Review Board "understands the timeline Texas public retirement systems face in meeting the new requirements in SB 322 and will make every effort to finalize guidance for the systems as early as possible," particularly regarding investment performance evaluations and enhanced investment fee disclosures, said Ashley Rendon, a review board management analyst, in an email.

    Senate Bill 322 also requires that Texas public pension funds list investment managers and provide direct and indirect investment fees by asset class in their annual financial reports. The law also mandates posting annual investment reports on a pension system's website or another publicly available site.

    Sources said Texas is the only state to mandate detailed reporting on the public pension fund investment aside from South Carolina, which enacted a similar law in 2017.

    "The general trend is to increase disclosure voluntarily to avoid having it legislated," said Randall W. Miller, principal and chief operating officer at governance consultant Funston Advisory Services LLC, Bloomfield Hills, Mich.

    Mr. Miller said funds such as the $210.2 billion New York State Common Retirement Fund, Albany, for example, releases monthly reports detailing investment activity, new manager hires and information about placement agents, but the report lacks disclosure about investment fees.

    Other sources agreed that Texas' new law expands the level of disclosure required of public pension systems.

    "What makes this law unique is the breadth of the regulation. While many elements were already covered in GASB 67/68, the level of detail required for commissions and fees sets a new level of disclosure standards," said Leon F. "Rocky" Joyner, Atlanta-based vice president and actuary, public-sector retirement practice leader, Segal Consulting.


    Already captured

    Most of the state's large public retirement systems already capture the investment information mandated by the new law.

    Meeting the reporting requirement "won't be a big lift" for Texas Teachers, said Brian Guthrie, executive director, given that most of the required information already is being collected by the pension fund and the system's consultant, Aon Hewitt Investment Consulting Inc., as part of regular reporting.

    Mr. Guthrie said fund officials are waiting to hear from the Texas Pension Review Board to get specifics regarding what will be required for the evaluation report.

    Keith Yawn, director of the office of strategic initiatives at the $29.1 billion Employees' Retirement System of Texas, also said "there won't be a lot of change" to what the fund already reports in the state evaluation report.

    The City of Austin Employees' Retirement System "supports the bill's transparency requirements and the focus on fiduciary standards," but because SB 322 requires plans to pay an evaluation firm, the cost burden on smaller plans may be high, said Christopher Hanson, executive director.

    COAERS "already collects the vast majority of what the legislation requires," Mr. Hanson said, but having the fund's investment consultant, RVK Inc., gather required information and evaluate the system's operations will cost about $40,000.

    The cost would be even higher if COAERS hired another consultant, which would need more time and labor to study the system.

    In other legislative action related to pension issues in the 86th Texas Legislative session, Mr. Abbott signed Senate Bill 2224 on June 4, which requires boards of trustees of public pension funds of all sizes to adopt a written plan for achieving a funding ratio of 100% or higher no later than Jan. 1, 2020.

    On June 10, the governor signed SB 12, which will gradually increase contributions to the Texas Teacher Retirement System from the state, school districts and employees to bring the plan to fully funded status in 29 years down from 87 years (Pensions & Investments, May 29).

    Related Article
    Texas Legislature passes bill raising contributions to teachers pension plan
    Texas Legislature passes Houston pension reform bill
    Texas Supreme Court affirms ruling that DROP changes at pension fund are constitutional
    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Targeting millennials: Author, niece put his latest book to music
    Targeting millennials: Author, niece put his latest book to music
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
    COVID-19 Makes LP Portfolio Management More Important Than Ever
    China: the outlook is bright for longer-term investors
    Finding Differentiation in Securitized Assets
    Green and sustainable bonds in emerging markets
    Portfolio Protection: One Size Fits None
    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
    April 5, 2021 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.

    pilogo-NEW
    About Us

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

    Chicago Office
    150 N. Michigan Ave.
    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 © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center