TMRS investment staff continue to pursue new investment opportunities in the areas of private equity, real return, and real estate for portfolio diversification as outlined in the TMRS Investment Policy. TMRS staff discussed and reviewed current cash flows and cash levels. TMRS cash needs to continue to evolve as the portfolio has been invested/diversified over the last five years. Cash on hand increased but remains within the Investment Policy guidelines of zero to 10 percent. Cash needs are changing as the TMRS portfolio matures and the global economy progresses. A full evaluation of the optimal target cash-on-hand level will be part of the upcoming Asset-Liability and Asset Allocation Study conducted in 2019.
The TMRS Board underwent some on-going trustee training conducted by TMRS fiduciary counsel. Board member’s duties, rights, and responsibilities were reviewed as well as the importance for Board members to be prudent and avoid any conflicts of interest.
TMRS staff, along with the TMRS Technology Committee (comprised of TMRS Board members), gave an update on the pension administration system assessment. TMRS will implement a completely new pension software system in the future. An RFP has been developed to establish the selection process and scoring criteria. This will be an exciting enhancement for both TMRS staff and individual TMRS members. This new software is anticipated to both enhance and add greater website capabilities for TMRS members. The Technology Committee did caution that full software implementation and functionality could take anywhere from two to seven years. Final timelines will not be known until the RFP has been awarded.
It was reported that TMRS currently has 875 participating cities. Included in this number are five new participating cities which were added in 2018.
It’s no surprise to any of us finance professionals that the last quarter of 2018 was bad for investments of just about any kind. As a result, the last quarter really had a negative impact on overall calendar year 2018 TMRS Total Fund earnings. For the calendar year 2018, the TMRS Total Fund performance ended at (-2.43%), net of fees. For comparison, inception-to-date (01/01/1989), the TMRS Total Fund performance is 8.25%. The goal outlined in the TMRS Investment Policy is 6.75%. Despite this bad news, in comparison to TMRS peers, TMRS fared better than most for 2018. As a result of the dismal 2018, TMRS staff warned of potential future rate increases due to asset losses in 2018. Final rates will not be determined until the 2018 Actuarial Valuation is completed.
Finally, both TMRS staff and TMRS legislative consultant gave an update on the current 86th Texas Legislative Session. At the time of the meeting, there were 36 pension-related bills filed. These bills are currently being reviewed and monitored for any potential impacts to TMRS. Interestingly, TMRS is in the process of filing a bill for administrative fixes which includes nine legislative proposals (five board governance and legal proposals and four city-related and administrative proposals) that the TMRS Board identified as “priority items.” The Bill was crafted by TMRS staff and is expected to be sponsored by Rep. Dan Flynn and Sen. Joan Huffman. Within the proposed Bill, the topics of the five board governance and legal proposals include: 1) board meetings; 2) immunity and liability protection; 3) legal advisor; 4) confidential information and audit working papers; and 5) investment of assets – definition of security. Also within the proposed Bill, the topics of the four city-related and administrative proposals include: 1) amortization periods; 2) prior service credit and updated service credit; 3) providing information electronically; and 4) occupational disability.
The next TMRS Board Meeting is set for March 28-29, 2019, at the TMRS headquarters in Austin.
TMRS Advisory Board Representative