The Arkansas Teacher Retirement System's trustees Monday authorized up to $135 million in new private equity and real estate investments.
They also decided to give a credit of 2 percent interest on active deferred retirement accounts at the end of fiscal year 2017.
The Teacher Retirement System is state government's largest with more than $14 billion in investments and more than 100,000 working and retired members.
The system's investments were valued at $14.41 billion on April 30 -- up from $14.27 billion at the start of April -- system investment consultant Aon Hewitt Investment Consulting of Chicago said in a preliminary report. The report doesn't factor in changes in the system's private equity, real estate, timber, agriculture and infrastructure investments for the month.
The system's investments also increased in value in May, said P.J. Kelly of Aon Hewitt.
He said he's hoping the system's investments increase in value in the final few weeks of this fiscal year, which ends June 30. The system's investments were valued at $14.975 billion at the start of the fiscal year on July 1, 2015.
The trustees on Monday authorized the following investments:
• Up to $50 million in the UBS Trumbull Property Income Fund LP, a real estate debt fund that will be managed by UBS Realty Investors of Hartford, Conn.
The fund targets participating mortgages, according to the system staff's written report.
• Up to $30 million in LaSalle Asia Opportunity Fund V LP, a real estate fund that will be managed by LaSalle Investment Management of Chicago.
The fund will make debt or equity investments in office, retail, residential, warehousing, hotels and other commercial properties, primarily in Asia, with assets in Australia, China and Japan expected to comprise the bulk of the portfolio, according to Aon Hewitt Investment Consulting.
• Up $35 million in Bison Capital Partners V LP, a private equity debt and equity fund that will be managed by Bison Capital Management of New York and Santa Monica, Calif.
The fund will seek to make debt or equity investments in small and lower middle market U.S. companies, primarily in the business services, health care services, technology-enabled businesses, and logistics and distribution sectors, the system's staff report said.
• Up to $20 million in Altaris Constellation Partners LP, a private equity buyout fund that will be managed by Altaris Capital Partners of New York.
The fund will primarily target U.S. and European health care companies with "attributes such as intellectual property, defensible market positions, limited government reimbursement and transformational business models," the system staff report said. "In particular, the fund will focus on corporate carveouts, leveraged buyouts and growth equity investments in pharmaceutical, medical device, and information and technology companies."
In other business, the system's trustees decided to credit deferred retirement accounts a 2 percent interest rate for fiscal 2017. The money will be paid on June 30, 2017, to accounts that are open and active on that date. The payments will total an estimated $7 million.
Under the system's rules, the interest rate on the deferred retirement accounts is required to be 2 percent less than the system's investment rate of return, but with a minimum of 2 percent and a maximum of 6 percent, the system's staff said in a written report. The system's rate of return in the year that ended March 31 was less than 3 percent.
The retirement system includes 68,945 working members who are not part of the deferred retirement plan, with an average annual salary of $36,717, and 3,974 other working members who are part of the deferred retirement plan, with an average annual salary of $61,874 as of June 30, according to system actuary Gabriel, Roeder, Smith & Co. of Southfield, Mich.
The system also includes 40,748 retired members with an average annual pension of $22,495 as of June 30, the actuarial firm reported.
The system's employers paid $408 million into the system last fiscal year, while system's members paid $128 million, according to George Hopkins, system director.
The system's unfunded liabilities totaled $3.7 billion on June 30 with a projected payoff period of 33 years, according to Gabriel, Roeder, Smith & Co.
Unfunded liabilities are the amount by which financial liabilities -- the projected amount needed to pay benefits to all of its retirees -- exceed an actuarial value of the system's assets.
Actuaries often compare the payoff period to a mortgage on a house. State law requires the state government's retirement systems to aim for projected payoff periods of 30 years or less.
In other action Monday, the trustees' operations committee decided that the system should stop including Arkansas Education Association membership enrollment packets when sending final retirement documents to retiring system members.
The committee's action came after the Arkansas State Teachers Association asked the system to send out its membership enrollment packets, too.
The system once had a practice of including Arkansas Education Association and Arkansas Retired Teachers Association membership enrollment information when mailing packets on final retirement documents to retiring system members.
"This has been done over many years as a courtesy to the organizations since both can have legislatively approved membership deductions from the monthly ATRS benefit payments," the report said. "Over the years, the ARTA organization stopped supplying enrollment packets to ATRS, and instead began contacting retirees directly."
The Arkansas Education Association membership enrollment packets are still included with the final mailing of ATRS retirement documents, and "there was never a policy in place, just an informal arrangement," the report said.
Metro on 06/07/2016