Texas Government Code §802.202, requires Texas public retirement systems to adopt a written investment policy. The law does not mandate the type or ratio of investments. The written investment policy must be available to the public for review, and a copy must be filed with the Pension Review Board within 90 days of adoption.
Under Section 27(d), Article 6243e, Vernon’s Civil Statutes, TLFFRA systems are also required adopt formal investment policies that emphasize safety, diversity, and liquidity for benefit payments.
Written Investment Policies for Public Pension Systems
For many years, the Pension Review Board has stressed the importance of written investment policies. Having written investment policies in place is a basic minimum requirement for funds to follow. Not only does having a written policy focus on a board’s investment goals, it also provides an objective framework in which investment managers can operate and allows the board of trustees checkpoints for seeing that their policy is being carried out properly.
There are two clear benefits of a carefully considered written investment policy:
An investment policy should focus on the big picture, stating such things as asset allocation, types of allowable investments rather than specific investments, and other criteria such as standards of investment quality and rate of return objectives. If this is accomplished, the Trustees can refer to their “business plan” and make adjustments on a quarterly or annual basis. As a “test” a Trustee should be able to read investment policies and answer yes to the following questions.
Trustee Outline For Developing A Written Investment Policy
The Pension Review Board is providing the following basic outline for a Trustee to consider in developing a written investment policy.
Written Investment Policy Introduction
Investment Objectives (These should be expressed as a percentage)
What are the objectives of the total fund as measured in the following ways?
Describe the Investment Policy as it relates to each of the specific assets in your allocation. For example, if you have stocks do you believe in a growth philosophy or a conservative income philosophy? For bonds, do you believe in long-term, intermediate bonds, or comparing the bonds against a recognized index? Other issues in investment guidelines: What are my concerns and needs for:
Investment Manager Review Procedure
Contact the Texas Pension Review Board at (512) 463-1736 if you any questions or if you would like a copy of a written investment policy that is on file.