July 2016 Committee of the Full Board Wednesday Item 4

Review and Adoption of the Long-Term Strategic Asset Allocation Plan
of the Permanent School Fund

July 22, 2016

COMMITTEE OF THE FULL BOARD: ACTION
STATE BOARD OF EDUCATION: CONSENT

SUMMARY: This item provides an opportunity for the board to review and adopt the long-term strategic asset allocation plan of the Permanent School Fund.

STATUTORY AUTHORITY: Texas Constitution, Article VII, §5(f).

PREVIOUS BOARD ACTION: In July 2014, the board reviewed and adopted the Permanent School Fund long-term strategic asset allocation plan.

FUTURE ACTION EXPECTED: None.

BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: One of the primary duties of the board in its oversight of the Permanent School Fund is to establish the long-term asset allocation policy of the Fund. The allocation of the Fund’s assets between various classes of securities will explain approximately 90% of the Fund’s variation of returns. The overall risk assumed by the Fund is managed through the diversification of asset classes in which the Fund is invested.

FISCAL IMPACT: The distribution of the Permanent School Fund is projected to be
$2.1 billion during the 2016-2017 biennium. The distribution earned by the Fund is affected by the asset allocation of the Fund and the capital market environment.

PUBLIC AND STUDENT BENEFIT: The distribution of the Permanent School Fund will flow to the school districts and reduce the tax burden to the public and the state of Texas.

PROCEDURAL AND REPORTING IMPLICATIONS: None.

PUBLIC COMMENTS: None.

OTHER COMMENTS AND RELATED ISSUES: None.

Staff Member Responsible:
Holland Timmins, Executive Administrator
and Chief Investment Officer of the
Texas Permanent School Fund