The search is expected to be completed by August of this year, according to a TRS news release. The System said the search for a money management firm follows the Board’s decision to increase System investments in “non-dollar and emerging market debt” within its fixed income portfolio.
A study of the System’s fixed income investments by TRS staff and the System’s general investment consultant, R.V. Kuhns & Associates found that investment returns for the fixed income portfolio would likely benefit if more emphasis was placed on foreign currency bonds in developing countries with growing economies. However, the announcement noted, the current one-year rate of return on investments for the TRS fixed income portfolio is strong, standing at 23.89%, more than 16 percentage points higher than the expected benchmark rate of return of 7.69%.
In other action, the TRS Board authorized the issue of a Request for Proposal to seek an adviser for the initiation of a formal private equity “co-investment” program. A final recommendation is expected in August. The System is seeking to make direct, non-control co-investments in privately held companies alongside existing private equity fund investments, according to the news release.
The Board also:
- Approved a new strategic plan for the System’s $1.2 billion absolute return portfolio. The updated plan calls for building on the current foundation of fund of funds with small and diversified direct investments as the portfolio grows from its current 3.75% allocation to the long-term target of 5%.
- Selected Davis Hamilton Jackson & Associates of Houston, Texas, to manage $25 million in TRS assets within the fixed income core plus portfolio as part of the Emerging Managers Program.
- Committed $75 million to Littlejohn Fund IV, L.P., of Greenwich, Connecticut, a private equity fund focused on reviving middle-market firms that are underperforming or financially distressed.
- Approved a direct investment of up to $100 million in TRS assets to SKBHC Holdings, LLC to help the newly-formed firm carry out a three-year strategy of rescuing failed community banks in the Midwest, Northwest and Western states.
- Voted to remove PIMCO and Trilogy Global Advisors from the TRS Watch List of investment firms being monitored for performance and compliance reasons following improved performance during the first quarter of 2010. PIMCO manages $485 million in the TRS domestic equity – enhanced index portfolio. Trilogy manages $351 million in the international equity – active core portfolio.
- Voted to terminate the services of EARNEST Partners in managing $155 million of TRS assets in the fixed income – core plus portfolio. The termination follows continued sub-par performance, TRS said.
- Added Piedmont Investment Advisors to the Watch List because of continued sub-par performance. Piedmont manages $98 million in the domestic equity – enhanced index portfolio.