HBA-DMH S.B. 983 77(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 983 By: Duncan Pensions & Investments 5/2/2001 Engrossed BACKGROUND AND PURPOSE Currently, most agencies that invest state funds are authorized to use outside money managers to invest some portion of those funds. State investment experts suggest that utilization of outside managers enhances portfolio diversity thus providing a greater level of insulation from market fluctuations. The Employees' Retirement System (ERS) and the Teacher Retirement System (TRS) currently have authority to utilize outside advisors, but not managers. The Senate Finance Interim Subcommittee on Major State Investments recommended that ERS and TRS be given authority to contract with outside money managers. Senate Bill 983 provides ERS, TRS, and the Judicial Retirement System of Texas Plan Two with that authority. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS Senate Bill 983 amends the Government Code to authorize the board of trustees of the Employees Retirement System, the Teacher Retirement System, and the Judicial Retirement System of Texas Plan Two (board) to contract with an investment manager to invest any of their respective retirement system's assets. The bill requires the board, in a contract entered into for investing retirement system's assets on behalf of the board, to specify any policies, requirements, or restrictions, including criteria for determining the quality of investments and for the use of standard rating services, that the board adopts for investments of the system. The bill requires the board to monitor the investments made by the investment manager and authorizes the board to monitor the investments at any time. The bill authorizes the board to contract for professional evaluation services to fulfill this requirement. The bill provides that an investment manager with whom the board contracts who assumes fiduciary responsibilities to a retirement system is considered to agree that the laws of this state govern the performance of the manager's responsibilities to the system and to submit to the jurisdiction of the courts of this state. The venue of an action involving a breach of a duty owed by an investment manager to a retirement system or its participants is in Travis County. The bill provides that the board, a trustee, or an employee of a retirement system is not liable, personally or in the person's capacity as a trustee or employee, for the acts, omissions, or decisions of an investment manager to whom fiduciary responsibilities have been delegated. EFFECTIVE DATE On passage, or if the Act does not receive the necessary vote, the Act takes effect September 1, 2001.