Trustees Pull $420 Million Investment From Boston Fund

The Arkansas Teacher Retirement System’s trustees on Monday terminated its investment of about $420 million in a fund managed by a Boston-based firm.

The company is Wellington Management Company LLP, which has been an investment manager for the system since 2007, according to Chicago-based system investment consultant Hewitt Ennis Knupp.

Wellington Management Co. manages two global stock market portfolios for the system with a combined value of about $699 million as of Dec. 31, Hewitt Ennis Knupp said in a memo to the system’s trustees.

The trustees voted to end the system’s investment of about $420 million in Wellington’s “opportunistic equity portfolio” and invest the proceeds into a global stock market index fund.

Hewitt Ennis Knupp said it has become “increasingly concerned regarding the consistency and repeatability of the investment process, as well as the robustness or risk management procedures surrounding the strategy” for this particular fund.

The trustees also learned that the system has invested $5.8 million to purchase a 436-acre organic citrus farm in Polk County, Fla., and $3.03 million to purchase an 892-acre farm in Des Arc, known as the James Miller farm.

The trustees also learned through a preliminary report from Hewitt Ennis Knupp that the system’s investments were valued at $11.85 billion as of Dec. 31. The system’s investment return for the last quarter was 2.2 percent and the return for the first six months of the fiscal year is 6.4 percent, the report said.

System Executive Director George Hopkins said the system’s investments were valued at roughly $12.25 billion as of Jan. 31.

In other business, the trustees decided that they want Senate Bill 123, sponsored by Sen. Bruce Maloch, D-Magnolia, to be amended.

The bill, one of about 20 proposed by the system as part of its legislative package would give the trustees the authority to increase the amount system members contribute to the retirement fund from 6 percent to a maximum of 8 percent of their salaries.

The trustees said they want the bill changed so they would only have authority to increase that rate from6 percent to 7 percent. The trustees would be able to increase the rate charged to system members if it’s projected that it would take more than 30 years for the system to pay back its unfunded liabilities.

State law encourages the state’s retirement systems to have fewer than 30 years of unfunded liabilities to pay back.

System actuary Gabriel, Roeder, Smith & Co. of Southfield, Mich., told the trustees in December that the system’s projected period for paying off its unfunded liabilities exceeded 100 years on June 30.

Northwest Arkansas, Pages 7 on 02/05/2013

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