TEXAS PUBLIC INVESTMENT FUNDS

State's big investment funds bouncing back

Texas' major public investment funds have stanched the bleeding from the past year's historic financial market losses and are returning to good health.

As of the end of September, the assets of the Employees Retirement System of Texas fund and the Permanent School Fund had plumped up to almost the same size they were a year ago.

The Teacher Retirement System of Texas was just below that mark, too, said Brian Guthrie, the retirement system's deputy director.

The funds have not, however, bounced back to where they were before September 2008, when the collapse of Lehman Brothers sent the financial markets — and the funds' balances — into free fall.

All of the state's major funds bottomed out late February or March, some having lost about 30 percent of their August 2008 value. In that same period, the equities markets were down more than 40 percent.

But the market conditions and the funds' performances have been looking up.

"We're certainly not out of the woods yet, but we're in a much better position than we were a year ago or even six months ago," Guthrie said.

The teachers' fund was up to $88.7 billion as of the end of August, about a 28 percent rebound from its low in March.

The fund, however, is still well below the benchmarks required for it to give retirees an increase in their payments, Guthrie said. And that is unlikely to change even with a robust comeback, he said, because the fund will still need to account for unrealized losses for a while.

The Texas Municipal Retirement System, which serves employees of 800 small and mid-sized Texas cities, remains the anomaly in Texas.

It has long employed an ultra-conservative investment strategy — with 87 percent of the fund in bonds and other fixed-income investments at the close of 2008 — and that approach served the $16 billion fund very well during the tumult.

Since last September, the size of the fund has grown almost 13.5 percent including both investment returns and contributions.

Nancy Goerdel, acting chief investment officer of the municipal retirement fund, said she cannot take credit for those stellar numbers because it wasn't a strategic move to ride the market.

With the recovery under way, the fund is in a fortuitous position as it presses ahead on a new investment strategy that gradually embraces more equities, Goerdel said.

kalexander@statesman.com; 445-3618