The Arkansas Teacher Retirement System's board of trustees Monday authorized up to $105 million in new stock market, real estate and private equity investments, including stock market investments of up to $20 million managed by the Circumference Group of Little Rock.
The Circumference Group was founded by former Alltel Corp. Chief Operating Officer Jeff Fox.
The teacher retirement system's investments exceed $15 billion, the system's Chicago-based investment consultant Aon Hewitt Investment Consulting reported.
The system's trustees approved an up to $20 million investment in the Circumference Group's Core Value Fund and the eventual transfer of $10 million of the initial $20 million investment to the company's Concentrated Positions Fund.
Both of these funds will invest in stocks of companies in the information technology, telecommunications and business services industries, the system's staff members said in a written report to the system's board of the trustees.
At the trustees' request, Aon Hewitt visited Circumference Group's Little Rock office prior to the investments being approved.
"There were no unexpected issues or concerns, and it really confirmed our understanding of how they run their business," said Katie Comstock of the consulting firm.
System Executive Director George Hopkins told the trustees Monday that system and investment consultant officials are continuing with their review of two other possible Arkansas-based investment managers: the partnership of Stephens Inc. of Little Rock and Neuberger Berman of New York, as well as Delta Trust of Little Rock, which has been acquired by Simmons Bank.
In December 2013, the trustees said they supported Hopkins' proposal to pursue the development of a roughly $50 million investment fund and to find Arkansas-based investment managers willing to manage what he called "a fund of opportunities" that would invest in a variety of assets across the nation.
In addition to the investment authorized through the Circumference Group, the teacher retirement system's trustees Monday authorized an up to $30 million investment in the Lone Star Fund IV -- a real estate fund managed by the New York-based company Lone Star.
The fund will continue the firm's focus on acquiring "attractive opportunistic real estate investments on a global basis," and most of its investments will be in Europe, Aon Hewitt said. The fund is projected to raise $5.5 billion.
The trustees Monday approved an up to $30 million investment in EnCap Energy Capital Fund X, a private equity investment fund managed by EnCap Investments that is based in Dallas and Houston.
The fund is seeking commitments of $5 billion and is being formed to make "control equity investments" in oil and natural gas exploration and production companies in the United States and Canada, Aon Hewitt said. The system previously invested in En Energy Capital Funds VIII and IX.
The trustees also authorized an up to $25 million private equity investment in Franklin Park co-investment fund. Franklin Park is the system's private equity consultant based in Bala Cynwyd, Pa. Because it's a co-investment fund, the system won't have to pay management or incentive fees to Franklin Park, the system's staff members said.
The trustees also learned that the system's investments were valued at $15.07 billion as of Feb. 28 based on a preliminary report from Aon Hewitt. That's a $487 million increase between July 1, the start of the current fiscal year, and Feb. 28, the consulting firm reported. But that doesn't factor in changes in private equity, real estate, agriculture, timber and infrastructure investments that aren't available yet.
In other action, the trustees decided to pay a 5.5 percent interest rate to the system's deferred retirement plan participants' accounts for the fiscal 2016 year.
The system has 4,127 working members in deferred retirement plans with an annual combined payroll of $253 million, system actuary Gabriel, Roeder, Smith & Co., reported in December.
The system also includes 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. There are also 38,478 retired members with retirement benefits totaling $822 million (an average annual pension of $21,362), the actuarial firm reported.
School districts and other system employers paid $405 million into the system, while system members contributed $123.5 million in fiscal 2014.
Metro on 04/07/2015