Texas, USA (HEDGECO.NET) – Difficult times face the Texas Teachers retirement System [TRS]. According to published reports, the pension scheme does not have enough funds to pay promised benefits toits 610,000 active members unless it raises at least US$3.2 billion to accommodate all its active members due to retire in the next 30 years.
The pension fund administrators have decided to invest $3.3 billion of the funds assets in high-risk alternative investments, including private equity, venture capital and hedge funds. In the coming years, TRS plans to devote up to 8.5% of its total assets of $86 billion into alternative investments.
The controversy over such asset allocation comes from disclosure, according to news reports. TRS has refused to release details of its alternative investment portfolio, including fees and other costs associated with such investments.
While some think TRS� alternative investment decision may be a smart move, others argue that such decisions are worrisome. Leonard Cargill, former member of the Texas Pension Review Board said, “As a citizen of the state, I’d be worried sick�.
Many pension funds have begun to invest significant assets in hedge funds instruments. SEC Chairman William Donaldson cited such trend among some of the reasons for his push to regulate US hedge funds. According to Donaldson, investments by pension funds are made for what he referred to as �ordinary Americans,� justifying SEC�s oversight.
One of the largest pension fund investors in hedge fund instruments is the California Public Employees Retirement System [CALpers]. The pension fund was also the first to start investing with hedge fund managers.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
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