….as TRS reports its largest ever return

An overweight position to global equities and credit has contributed to the Teachers’ Retirement System of Texas recording its best ever investment return: 35 per cent for the year to March 2010.

Of the 260 basis points of value added, 300 basis points was added by asset allocation, with a small reduction from security selection, chief investment officer Britt Harris said.

The fund has an allocation of 60 per cent to global equities, 20 per cent to stable value and 20 per cent to real return assets.

Throughout the past year Harris said the portfolio was up to 3 per cent overweight global equities, with its maximum range at 5 per cent, and within the stable value portfolio it was underweight treasuries and overweight credit.

“That is probably our largest bet right now,” he said.

The fund benefited from the rally in global equities, with its listed global equities returning 57 per cent and emerging markets 83 per cent.

The best performing asset class for the fund was listed real estate, which was up 103 per cent, despite real estate overall still performing dismally at -24 per cent.

Harris said the return was the fund’s largest ever annual return, provided the greatest dollar gain ($25 billion), and the largest value added (2.6 per cent).

“This is the most positive report that’s ever been given in the history of Texas Teachers and also the most positive report I’ve ever given in almost 30 years,” Harris said.

“In the dark days we stressed that things would improve, now I’d like to stress that things won’t stay this good. The long term outlook will be more subdued.”