April 2014 Committee on School Finance Permanent School Fund Item 11

Presentation on the Absolute Return Portfolios Managed for the
Permanent School Fund and Decision on Absolute Return Investments

April 11, 2014

COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: CONSENT

SUMMARY:
This item provides an opportunity for the committee and board to receive a presentation and to review the absolute return portfolios managed for the Permanent School Fund. The board will consider contract extensions where appropriate and possible termination of absolute return fund of fund managers.

STATUTORY AUTHORITY: Texas Constitution, Article VII, §5(f).

PREVIOUS BOARD ACTION: At the April 2012 meeting, the board approved entering into an absolute return strategic relationship with Grosvenor Capital Management, L.P. and Blackstone Alternative Asset Management. At the November 2012 meeting, the board approved the termination of GAM USA, Inc. as an absolute return manager.

BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: At the July 2006 meeting, the board approved a long-term strategic asset allocation which included a 10% allocation to the absolute return asset class.

FISCAL IMPACT: The distribution of the Permanent School Fund is projected to be
$1.677 billion during the 2014-2015 biennium.

PUBLIC AND STUDENT BENEFIT: The distribution of the Permanent School Fund will flow to the school districts and reduce the tax burden to the public and the state of Texas.

PROCEDURAL AND REPORTING IMPLICATIONS:  Not applicable.

PUBLIC COMMENTS:  None.

ALTERNATIVES: No alternative actions are proposed regarding this item.

OTHER COMMENTS AND RELATED ISSUES: None.

Staff Member Responsible:
Holland Timmins, Executive Administrator
and Chief Investment Officer of the
Texas Permanent School Fund