TENNESSEE Consolidated Retirement System (TCRS) on Sept. 26 issued a press release saying it had realized an actual 10.06% rate of investment return for the year, via a portfolio valued at $69.4BN upon the June 30th end of FY 2024.

Prior to that, on Sept. 6, TCRS Chief Investment Officer Michael Brakebill told members of the TCRS Board of Trust that since State FY 2025 began on July 1 the TCRS portfolio had risen a further $1.7BN to $71.9BN value.

The next public meeting of the TCRS Investment Committee is set for Oct. 3. The next TCRS Board of Trust meeting is to be Dec. 6.

Meanwhile, TCRS stakeholders of all types might pay special attention today during Federal Reserve Bank Chairman Jerome Powell's visit to Nashville, where he scheduled to speak before the National Association for Business Economics (NABE).

Updated: Chairman Powell's NABE remarks are at YouTube replay.

In covering TCRS, VNC focuses mainly on TCRS's private-equity moves.

TCRS was created in 1972. The Tennessee General Assembly acted in 2008 to allow TCRS to invest in alternative assets, including PE, news that VNC broke here. More VNC TCRS coverage here.

When the PE option materialized 16 years ago, TCRS assets totaled about $32BN and, in the early years of its operation TCRS was guided to invest variously 3% to 5% of its assets in alternative assets.

VNC research indicates that as recently as March 31, 2024, TCRS's allocation to private equity stood at 13.4% versus its targeted 10% PE goal.

PE UPDATES

With assistance of TCRS staff in 2020, VNC was able to report many TCRS PE commitments during 2008-2020 in this VNC report.

This past spring, TCRS approved three more private-equity commitments totaling $190MM -- with $120MM of that committed to Philadelphia-based buyout fund FS Equity Partners IX.

Then, in June, TCRS reportedly made commitments to PE Quantum Capital Group, which describes itself as creating "one of the leading global private equity franchises focused on the Sustainable Energy Ecosystem" by seeking partnerships with "leading energy and sustainability entrepreneurs."

TCRS committed $60MM to Quantum Capital Group's Quantum Energy Partners VIII and $10MM to Quantum Energy Partners VIII Co-Investment Fund. Earlier this year, TCRS reportedly committed $200MM to Quantum Capital Solutions II.

On July 17 this year, the Investment Committee approved a $170MM investment in Bain Capital XIV LP.

In that same Investment Committee meeting, CIO Brakebill "highlighted recent underperformance of illiquid alternative assets compared to publicly traded securities," according to published minutes of that meeting.

VNC notes that, as of Sept. 27, the S&P 500® showed a one-year 34.24% return. A Reuters report this week says, in part, that the S&P Index "is up 20% year-to-date near a record high. With the third quarter ending on Monday, the index is on track for its strongest January-September performance since 1997."

A related Reuters report is out today here. Given the abovementioned Energy emphasis, we note that an S&P Energy graph today shows -5.27% one-year results, with data as-of Sept. 27.

VNC research indicates that no Tennessee-based private-equity or venture capital firm has attracted any TCRS alternative-asset commitment.

TCRS's FY 2023 Annual Report (at pages 14-15) lists roughly two-dozen professional consultants supporting TCRS efforts.

STROKES OF PENS

A year ago, Jeff Sommer, a financial-strategies writer for The New York Times, reported in cautionary terms that PE funds held about 13% of the total holdings of all pension funds in the U.S., citing among outliers, Oregon's 27.8% PE allocation. Data.

Sommer's NYTimes piece was published just ahead of the SEC's Aug. 23, 2023, adoption of rules designed to increase "transparency, competition, and efficiency in the private funds market."

That SEC move was applauded in some quarters. However, on June 5 this year, the U.S. Court of Appeals for the Fifth Circuit vacated SEC rules applicable to private fund advisers, creating uncertainty. Related: 1 | 2 | 3 | 4 |

RESOURCES

Hon. David Lillard Jr.

STATE Treasurer David Lillard Jr. is chairman of the TCRS Board of Trust and has been elected State Treasurer by members of the General Assembly for eight successive two-year terms of office since 2009.

TCRS FY 2023 annual report here. TCRS board and committee meetings archive. Overall, the Tennessee Department of the Treasury manages more than $103.9BN assets.

VIDEO of the Sept. 6, 2024, meeting of the TCRS Board of Trust is here. Brakebill's update begins at 32'45" in the video. His Sept. 6 presentation reflected $70.2BN assets at the end of FY24, June 30. Also, a report as-of March 31, 2024, by advisor Verus showed $69.7BN assets.

Last's week's TCRS press release underscored that the overall FY2024 investment return was higher than the actuarially derived 6.75% assumed rate of return (AROR). TCRS's adjustable AROR benchmark is managed with guidance from investment advisors, state agencies and others. More on AROR here and here.

Michael Brakebill

TCRS CIO Michael Brakebill earned his MBA at the University of Texas at Austin, his CFA charter in 1997 and his CAIA charter in 2012. He earned his bachelor's in mechanical engineering at Texas Tech University. His earlier career included managing equity portfolios for the Teacher Retirement System of Texas and investment management with Wilshire Associates (now owned by PE Motive Partners, CC Capital and St. Giles Group).

TCRS PE-related staff include Director of Private Equity is Daniel Crews CFA CAIA and Grant Leslie is Senior Portfolio Manager.

Public interest: The Sept. 26 TCRS press release said TCRS paid $3.28BN in benefits in FY24 to 161,993 retirees across the state, 92% of whom remain in Tennessee. The program has economic impact in each of this state's 95 counties. VNC

. last updated 1619 30 September 2024