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A BILL TO BE ENTITLED
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AN ACT
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relating to the investment authority of the Teacher Retirement |
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System of Texas. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 825.301, Government Code, is amended by |
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adding Subsections (a-1), (a-2), (a-3), and (b-1) and amending |
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Subsection (b) to read as follows: |
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(a-1) This subsection expires September 1, 2012, and |
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applies to the investment and reinvestment of assets of the |
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retirement system only if the investment or reinvestment is made |
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before September 1, 2012. In addition to any investment or |
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reinvestment authorized by Subsection (a), the board of trustees |
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may buy and sell the following, only to efficiently manage and |
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reduce the risk of the overall investment portfolio: |
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(1) futures contracts; |
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(2) options; |
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(3) options on futures contracts; |
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(4) forward contracts; |
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(5) swap contracts, including swap contracts with |
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embedded options; |
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(6) any instrument or contract intended to manage |
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transaction or currency exchange risk in purchasing, selling, or |
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holding investments; and |
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(7) any other instrument commonly used by |
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institutional investors to manage institutional investment |
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portfolios. |
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(a-2) The board of trustees may delegate investment |
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authority and contract with one or more private professional |
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investment managers for investment and management of not more than |
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30 percent of the total assets held in trust by the retirement |
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system. In a contract made under this subsection, the board of |
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trustees shall specify any applicable policies, requirements, or |
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restrictions, including criteria for determining the quality of |
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investments or the use of standard rating services, that the board |
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of trustees adopts for investments of the system. The board of |
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trustees may not contract under this subsection for investment and |
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management services to be performed on or after September 1, 2012. |
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(a-3) For the purpose of carrying out policy decisions made |
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by the board of trustees, the board may delegate investment |
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authority with respect to assets held by the retirement system to |
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the executive director or the staff of the retirement system. |
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(b) In addition to the board's authority under Subsection |
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(a-2), the [The] board of trustees may contract with private |
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professional investment managers, advisors, and consultants to |
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assist and advise the board and the staff of the retirement system |
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in investing the assets of the retirement system. |
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(b-1) By accepting a delegation of investment authority |
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under Subsection (a-2) or an engagement to assist or advise the |
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board or the staff of the retirement system under Subsection (b), a |
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professional investment manager, advisor, or consultant submits to |
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the jurisdiction of the courts of this state in all proceedings |
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arising from or related to performance of the delegated authority |
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or engagement. An action relating to services rendered under this |
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section shall be brought only in a state district court sitting in |
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Travis County, Texas. Chapter 2260 does not apply to a contract |
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under Subsection (a-2) or (b). This subsection does not waive any |
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immunity of the retirement system. |
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SECTION 2. Subchapter D, Chapter 825, Government Code, is |
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amended by adding Section 825.3011 to read as follows: |
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Sec. 825.3011. CERTAIN CONSULTATIONS CONCERNING |
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INVESTMENTS. (a) In this section, "private investment fund," |
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"reinvestment," and "restricted securities" have the meanings |
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assigned by Section 552.143. |
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(b) Chapter 551 does not require the board of trustees to |
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confer with one or more employees, consultants, or legal counsel of |
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the retirement system or with a third party, including |
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representatives of an issuer of restricted securities or a private |
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investment fund, in an open meeting if the only purpose of the |
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conference is to receive information from or question the |
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employees, consultants, or legal counsel of the retirement system |
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or the third party relating to: |
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(1) an investment or a potential investment by the |
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board of trustees in a private investment fund; or |
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(2) the purchase, holding, or disposal of restricted |
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securities or a private investment fund's investment in restricted |
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securities if, under Section 552.143, the information discussed |
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would be confidential and excepted from the requirements of Section |
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552.021 if the information was included in the records of a |
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governmental body. |
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(c) This section applies notwithstanding Section 825.115. |
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SECTION 3. Subchapter D, Chapter 825, Government Code, is |
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amended by adding Section 825.3012 to read as follows: |
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Sec. 825.3012. INVESTMENT IN CERTAIN HEDGE FUNDS LIMITED. |
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(a) For the purposes of this section, "hedge fund" means a private |
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investment vehicle that: |
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(1) is not registered as an investment company; |
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(2) issues securities only to accredited investors or |
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qualified purchasers under an exemption from registration; and |
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(3) engages primarily in the strategic trading of |
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securities and other financial instruments. |
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(b) Notwithstanding any provision of Section 825.301, not |
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more than five percent of the value of the total investment |
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portfolio of the retirement system may be invested in hedge funds. |
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(c) The percentage of the value described by Subsection (b) |
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is determined by reference to the value of the total investment |
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portfolio of the retirement system as of the date the retirement |
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system executes the subscription documents for each hedge fund |
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investment. |
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SECTION 4. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2007. |