LITTLE ROCK -- A New York-based firm will be allowed to invest up to $25 million on behalf of the Arkansas Teacher Retirement System.
The system's trustees Wednesday authorized the private-equity investment.
After the trustees' meeting, system Executive Director George Hopkins said the value of the system's investments probably dropped at least $700 million in the past two months.
That would more than wipe out the $386 million the investments gained in fiscal 2015, which ended June 30. At the time, the system's total investments were worth $14.97 billion.
The system had $8.9 billion invested in the global and domestic stock markets on June 30, and the stock markets experienced a major downturn in recent weeks.
The private-equity investment approved by the trustees Wednesday will be in the American Industrial Partners Capital Fund VI, which will be managed by American Industrial Partners.
American Industrial Partners was founded in 1989 and is led by three senior managers previously with Goldman Sachs, J.P. Morgan and large industrial corporations, the system's staff said in a report to trustees.
American Industrial Partners aims to raise $1.7 billion for the fund by the end of this month to invest in underperforming U.S. industrial companies and "fix whatever's broken" in order to turn them around, said Michael Bacine of the private-equity consulting firm Franklin Park Associates of Bala Cynwyd, Pa.
Hopkins told trustees the system received about $500 million in contributions from employers as well as their employees and had "probably right at a billion [dollars] paid out" in retirement and death benefits and refunded contributions in fiscal 2015.
Factoring all that in, the value of the system's total investments still climbed $386 million in fiscal 2015, he said.
That prompted trustee Danny Knight of Sherwood to ask, "Could we settle for that again this year?"
Hopkins replied, "Right now, I would."
Knight added, "I would, too."
The system's investment return of 5.2 percent in fiscal 2015 ranked among the top 2 percent of the nation's public pension plans as a result of its diversified portfolio, said Wayne Greathouse, the system's director of public markets.
After the trustees' meeting, Hopkins said the system's investment gains from fiscal 2015 have been outstripped by recent investment losses.
"We are like everybody else. We are just watching and seeing what happens next," he said, referring to stock markets.
"Typically, disruptions [in stock markets] when they are that stark usually have bounces the other way," Hopkins said.
The teacher retirement system is state government's largest retirement system with more than 100,000 working and retired members.
At the end of fiscal 2015, the system's $14.97 billion in investments included $5 billion in the global stock market, $3.9 billion in the domestic stock market, $2.3 billion in bonds, $1.4 billion in private equity, $1.2 billion in real estate, $382 million in timber, and $84 million in agricultural investments, according to the Chicago-based investment consulting firm Aon Hewitt Investment Consulting.
In fiscal 2014, the system included 70,225 working members with an average age of 44.7 years, an average service of 10.2 years and an average salary of $35,673, said actuary Gabriel, Roeder, Smith & Co. of Southfield, Mich.
The system also included 38,478 retired members with retirement benefits totaling $822 million (an average annual pension of $21,362), the actuarial firm said in a report late last year. It also reported 4,127 working members in deferred retirement plans with an annual combined payroll of $253 million.
NW News on 09/03/2015