Investments
TMRS Investment Policy - Adopted June 19, 2009 (pdf)
Investments flyer distributed at TML, October 2009 (pdf)
Performance Report as of September 30, 2009 (pdf)
Performance Report as of August 31, 2009 (pdf)
Performance Report as of July 31, 2009 (pdf)
8/21/09 RVK Board Presentation - Looking Ahead (pdf)
Performance Report as of May 31, 2009 (pdf)
Performance Report as of March 31, 2009 (pdf)
Performance Summary as of February 28, 2009 (pdf)
Performance Summary as of December 31, 2008 (pdf)
TMRS investments are held in trust for the exclusive benefit of members and invested under the provisions of the TMRS Act. The investment statutory guidelines for TMRS are found in the Texas Government Code, Sections 855.301 through 855.303.
PRINCIPLES AND OBJECTIVES
TMRS investments are managed to ensure that members, retirees, and beneficiaries are provided with the benefits they have been promised by their employers at a reasonable and predictable cost to the employers. Assets will be invested for total return with appropriate consideration for portfolio volatility (risk) and liquidity. Emphasis should be on both capital appreciation as well as the production of income in order to satisfy the short-term and long-term funding needs of TMRS. Total return includes dividends, interest, and realized and unrealized capital appreciation.
Investments are made with the degree of judgment and care, under the circumstances that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, considering the probable income from the securities and probable safety of their capital and in consideration of the purposes, terms, distribution requirements and other circumstances of the TMRS fund. Investment and management decisions respecting individual assets will be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the fund.
INVESTMENTS IN TRANSITION
As of December 31, 2008, the TMRS retirement fund was valued at $14.6 billion, invested predominantly in fixed income securities with a 12% allocation to equities. The initial move into equities, half in U.S. stocks and half in foreign stocks, was invested passively in index funds, a lower-cost approach. That allocation to equities, adopted by the Board of Trustees in November 2007, was a first step toward diversification of the portfolio, pending legislation that was subsequently adopted in 2009. The passage of HB 360 enables TMRS investments to be managed toward a total return objective.
How Will TMRS Diversify Its Investments?
As of August 2009, TMRS investments are allocated between fixed income and equity investments as shown below:
8% domestic equities
8% foreign equities
84% fixed income
In June 2009, the Board adopted an Investment Policy that reflects the change from an income to a total return objective and approved a strategic asset allocation policy that fully diversifies the investment portfolio, with plans to implement the allocation over a 5-year period. The long-term asset allocation target is:
20% domestic equities
20% international equities
35% fixed income
10% real estate
5% absolute return
5% real return
5% private equity
TMRS will make a gradual, deliberate, and prudent transition from its current asset allocation, focused on managing risk while improving the potential for future returns.
INVESTMENT UPDATES
May 31, 2009 - Investment performance for TMRS at May 31 was up year-to-date due to the positive performance of the global markets. The 1-year total return for the $14.8 billion fund was 1.78%, while the income return was 5.45%. A summary through 5/31/09 is available above.
As of this date, the equity allocation was $1.849 billion and 12.47% of the total portfolio with the remainder invested in fixed-income securities. At its meeting on June 19, 2009, the TMRS Board of Trustees adopted an investment policy that will diversify the investment portfolio in order to enhance returns while controlling risk over long periods. The allocation will be implemented over a number of years and is as follows: 20% domestic equities, 20% international equities, 35% fixed income, 10% real estate, 5% real return, 5% absolute return, and 5% private equity. Implementation of the equity allocations was authorized with 20% of the portfolio invested in domestic equity and 20% invested in international equity by the end of 2010. These will be invested in the passive commingled funds that TMRS currently invests in, replicating the Russell 3000 Index for domestic equities and the MSCI-EAFE Index for international equities.