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.