Giant Texas plan defers performance pay for execs

Chief investment officer of the US$81 billion Teacher Retirement System of Texas, Britt Harris, has offered to forego an estimated $167,935 in performance incentive pay for 2008. At the most recent board meeting, the TRS board accepted Harris’ offer and also voted to defer all remaining investment division performance pay until the fund experiences a year of positive returns. In 2008 the fund experienced a 27 per cent drop in market value.

“We are all suffering during this virtually unprecedented period,” Harris said. “The value of people’s investments has decreased and many are out of work or concerned about their jobs. As CIO it seems to me that I should also feel the effects of this difficult time – just like many of our members.”

Harris, whose 25 years of experience in the investment industry has included a tenure as CEO of Bridgewater Associates, joined the plan in November 2006.

Since then, he has transformed its investment strategy and altered the composition of the fund’s internal team. The investment team now staffs a deputy CIO overseeing strategic research, risk management, external managers, hedge funds and trading, in addition to other professionals working in strategic research and private markets.

Responding to the decision to defer any performance pay, Linus Wright, who became the plan’s chairman of trustees this January, acknowledged the professionalism of the investment team.

“We place great value on the skills, expertise and performance of our staff, and we appreciate how they have helped us avoid bigger losses during the current economic downturn. However, the board agreed with Harris that deferring performance payments at this time was the responsible thing to do,” Wright said.

“My fellow trustees and I admire and respect the selflessness shown by Britt and the entire investment staff.”

“It only reinforces what we have known all along – the professional strength and character of the TRS team.”

Previously, all of the fund’s traditional assets were managed in-house, but now the plan has four strategic partners with money spread across their best equity and bond offerings.

The fund has also dramatically increased its allocation to alternatives from 5 per cent to nearly 30 per cent, with 15 per cent in real estate, 10 per cent in private equity, and 4 per cent in hedge funds.