Legislature(2009 - 2010)SENATE FINANCE 532
02/11/2009 09:00 AM Senate FINANCE
| Audio | Topic |
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| Overview: | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
February 11, 2009
9:05 a.m.
9:05:53 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee meeting
to order at 9:05 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice-Chair
Senator Johnny Ellis
Senator Kim Elton
Senator Donny Olson
Senator Joe Thomas
MEMBERS ABSENT
None
ALSO PRESENT
Michael O'Leary, Executive Vice President, Callan
Associates; Mike Burns, Executive Director, Permanent Fund
Corporation, Department of Revenue. Jerry Burnett, Deputy
Commissioner, Division of Treasury, Department of Revenue;
Gary Bader, Chief Investment Officer, Treasury Division,
Department of Revenue; Pat Galvin, Commissioner, Department
of Revenue.
SUMMARY
^Overview:
Retirement Trust Performance Review
Constitutional Budget Reserve Performance Review
9:06:07 AM
MICHAEL O'LEARY, EXECUTIVE VICE PRESIDENT, CALLAN
ASSOCIATES, gave a presentation designed to answer questions
that arose during the Senate Finance Committee meeting of
2/10/09. He stated that he was misconstrued in press reports
regarding statements made during the 2/10/09 Senate Finance
Committee meeting. He stressed that Callan Associates did
not anticipate the financial meltdown and that the firm was
clearly incorrect in their view of the recovery.
Co-Chair Stedman asked if Mr. O'Leary was referring to the
magnitude or the direction of the financial meltdown. Mr.
O'Leary replied that he was referring to the magnitude of
the situation.
Mr. O'Leary proceeded using a PowerPoint presentation,
"Initial Response to Committee Questions" (Copy on File).
The first question was in regard to the National Association
of College and University Business Officers (NACUBO) study.
The graph on Slide 2 illustrates that there are 77
institutions with assets greater than $1 billion. The
dispersion policies in the institutions are provided within
the NACUBO study. Slide 3 lists the largest institutions
participating in the study. He noted that 20 funds had
assets of more than $4 billion.
Mr. O'Leary turned to the committee's second question
regarding the Alaska Retirement Management Board (ARMB)
Public Employees' Retirement System (PERS) and Teachers
Retirement System (TRS) policies. The question concerned
expectations for PERS and TRS policies and subsequent action
two years ago. He noted that many people expect higher
returns in the near future, but he opined that the returns
will not overcome the money lost during the market downturn
in 2008.
9:11:00 AM
Mr. O'Leary explained Slide 4 "ARMB and Alaska Permanent
Fund Corporation (APFC) Policies Throughout Recent Years."
The chart illustrates that both the ARMB and the AFPC boards
annually review investment policies and update them as new
projections become available. Changes are minor and
infrequent. The slide depicts a comparison of the ARMB
policies for PERS and TERS and the APFC funds for FY06/FY07,
FY07/FY08, FY08/FY09, and FY09/FY10. Neither board adopted a
policy for FY09 and FY10 so the difference is in expected
returns from lower values.
Mr. O'Leary explained the difference in expected returns.
The permanent fund had a heavier fixed income allocation
without other assets. In the case of the ARMB, farmland,
energy investment, and timber are grouped together as
"other" assets. In FY07 and FY08, the policies were changed
for both ARMB and AFPC. In the case of the AFPC, an
introduction of the other category established an
infrastructure investment as part of the policy.
9:15:09 AM
Mr. O'Leary addressed "Important Notes" on Slide 4:
1. Composition of "other" category varies by fund
ARMB - farmland, energy, timber, and Treasury Inflation
Protected Securities (TIPS)
APFC - Infrastructure
2. Both funds include sub-sectors within fixed income
3. APFC actual allocation to Private Equity is much more
recent and therefore underfunded relative to ARMB.
4. Implementation (structure) approaches to public equity
allocation vary by fund. Big difference is the use fo
"global equity managers by APFC. We have apportioned
global to domestic and international to help ease of
comparison.
5. Neither board has yet adopted a policy for the 2009-10
fiscal period. We simply applied new projections to the
current policies.
Co-Chair Stedman requested the aggregate of the
Constitutional Budget Reserve (CBR). Mr. O'Leary explained
that Callan Associates does not work with the CBR.
Mr. O'Leary introduced the graph on Slide 5, "Cumulative
Wealth." He suggested that if a digression was made to the
beginning of calendar year 2007, and began with $100
achieving the expected return for ARMB, a growth of 8.05
percent would be seen, represented by the red line. The
yellow line represents the APFC expected return of 7.77
percent. The green and blue lines depict actual events in
calendar year 2008, which were typical of other funds of
this type.
9:18:27 AM
Mr. O'Leary continued that the initial $100 declined to $85
in the case of ARMB and $81 in the case of the APFC. He
noted that the ARMB return for 2008 is not yet complete and
results are not typically available until next week.
Preliminary 2008 real estate numbers were used to create an
estimated return for the committee's deliberation. He
guessed that the fund was down between 22 and 24 percent.
Co-Chair Stedman asked if the actual return for January was
the starting point. Mr. O'Leary answered that he used the
$80.98 for the APFC as the beginning value and then grew
that by the expected return given the new return estimates
seen on Slide 4. The APFC was grown at 9 percent for next
five years. The ARMB was grown at 9.09 percent given its
policy mix for the next five years. With the optimistic
assumption, the result at the end of calendar year 2013 is
for returns comfortably above the initial $100 but well
below numbers that would have been achieved with the
anticipated amounts prior to the financial meltdown.
9:21:46 AM
Senator Thomas asked about a comparison of numbers for 2013.
Mr. O'Leary stated that some fluctuation in the rate of
return was anticipated.
Co-Chair Stedman supposed that there was a significant
change in the ending dollar value in 2013. Mr. O'Leary
agreed. He stated that there is a tendency for the public to
believe that a higher return is anticipated, but the
severity of the 2008 downturn was so great that it will take
a long time to recover.
9:23:30 AM
MIKE BURNS, EXECUTIVE DIRECTOR, PERMANENT FUND CORPORATION,
DEPARTMENT OF REVENUE, addressed the Permanent Fund
Corporation Asset Allocation (Copy on File). He felt that in
light of market place changes the long term investment is an
advantage. The year has been arduous, but the difficulty was
not anticipated. Different action would have been taken if
the market collapse had been anticipated. The asset
allocation is fine for the long-term, but it was not
advantageous in the fall.
Senator Thomas requested a projection for calendar year
2009. He asked what would happen in the event of another
market decline with the magnitude of 2008. Mr. O'Leary
stated that he did not believe it likely to happen because
of policy actions taken to push liquidity into the system.
He explained that he was focusing on the difference in
interest rate levels as opposed to an economic plan. The
market fall led to a credit freeze. He did not expect a
similar situation to occur again.
9:27:43 AM
Co-Chair Stedman asked about a potential market decline of
lesser magnitude, (10 or 15 percent). He requested a graph
representing a market decline of 10 percent.
Senator Elton asked about the asset allocation decisions
made in May. He asked about possible advantages in
increasing the timetable to remain ahead of the investment
curve, given the rapid market change in 2008.
Mr. Burns answered that premature decisions can lead to a
gamble with market timing. He explained that different asset
classes were not the issue. Some weakness was noticed in the
credit markets two years ago leading to a $500 million
allocation to distressed debt, but the credit cycle was the
focus as opposed to the collapse of the financial system.
9:31:28 AM
Mr. O'Leary stated that the commitment to distress was made
two years ago with the understanding that the money would be
drawn down gradually by the manager as distressed
opportunities arose. He anticipated a more traditional
credit cycle. In addition, assets are adjusted in portfolios
to reflect the best thinking in regard to outlook. The
global equity managers have latitude to shift money from
abroad to domestic accounts.
Co-Chair Stedman requested assistance regarding the
difference between the ARMB is a board allocation and the
permanent fund allocation. The Permanent Fund Dividend (PFD)
has a longer time horizon than the retirement fund without a
demand on liquidity. He asked for help understanding why the
PFD doesn't have a higher risk level than the retirement
fund.
Mr. O'Leary answered that the movement in the permanent fund
has been toward the higher return and higher volatility. The
fund is the most permanent of the pools with the least long
term liquidity requirements. The permanent fund is more
conservative because of legislative restrictions. The
limiting factor in the permanent fund is the limitation on
the payment of distributions with regard to earning
reserves.
9:36:19 AM
Mr. O'Leary explained that the permanent fund is similar to
the pension system with funded private equity exposure.
Investment policies in the pension system will eventually be
more conservative. The pension system will have a lower
chance of achieving the earnings assumption of 8.25 percent,
which equates to a real return of 5.5 percent requiring a
heavy equity commitment. The expectation is that the pension
system will be in a net inflow position for a protracted
period. The policy will be more conservative because the
liquidity needs of the system will be growing.
Senator Thomas asked for an explanation of an actuarial
assumption of 8.25 percent equating to 5.5 percent in
reality. Mr. O'Leary answered that he was simply subtracting
the estimated 2.75 percent inflation from the 8.25 percent.
There is an embedded inflation assumption higher than 2.75
percent.
Co-Chair Stedman concluded the presentation and moved on to
the retirement trust performance review.
JERRY BURNETT, DEPUTY COMMISSIONER, DIVISION OF TREASURY,
DEPARTMENT OF REVENUE, introduced the PowerPoint
presentation, "Investment Operation Orientation: Treasury
Division, Portfolio Management Section. February 2009" (Copy
on File).
Co-Chair Stedman requested that the discussion point remain
on the CBR and its policy procedures rather than the Public
Employees' Retirement Trust Fund which required only a brief
update on status and performance.
GARY BADER, CHIEF INVESTMENT OFFICER, TREASURY DIVISION,
DEPARTMENT OF REVENUE explained Slide 2 and the outline of
resources available to the ARMB. The retirement management
board uses the staff of the Department of Revenue (DOR) as
it's investment arm. An Investment Advisory Committee (IAC)
consisting of three individuals is available to the board.
The IAC has a general consultant (Mr. O'Leary), a Chief
Investment Officer (CIO) (Mr. Bader), and the staff to the
CIO. The general consultant exercises control over the
external asset management of funds, as well as managing $16
billion internally, of which $2 billion is the board's fixed
income.
9:43:08 AM
Mr. Bader discussed Slide 3 and 4 "Fiduciary of the Fund":
· AS 14.25.007
· Consider status of the fund's investments and
liabilities
· Determine the appropriate investment objectives
· Establish investment policies to achieve objective
· Act only in regard to the best interest of the system's
plan and beneficiaries
· Nine Members
· Establish Investment Policies
· Review Actuarial Earnings Assumption
· Establish Asset Allocation
· Provide Investment Options
Mr. Bader explained the functions of the ARMB consultant Mr.
O'Leary (Slide 5):
· Assert Allocation/Strategy
· Performance Measurement
· General Consulting
o General
o Specific
o Assist in Asset Manager Searches
Mr. Bader described that the Investment Advisory Council
(Slide 6):
· Permitted by Statute
· Three to Five Members
· Review and Advise on Investment Policy, Strategy and
Procedures
o Dr. Jerrold Mitchell
o Dr. William W. Jennings
o George Wilson
Mr. Bader discussed the "Asset Allocation Decision" (Slide
7):
· Investment Objective
· Risk Tolerance
· Expected Return of Each Asset Class
· Expected Volatility of Each Asset Class
· Correlation of Performance Between Asset Classes
· Efficient Frontier
9:47:02 AM
Mr. Bader discussed a graph on Slide 8 depicting the
historical risk/return tradeoff. The graph gives an idea
over the long run of how the various asset classes perform.
He explained that the Y axis shows the investment returns of
these asset classes over a long period of time (1926-2004).
The X axis defines risk as standard deviation or the
volatility of the returns.
Mr. Bader explained another graph on Slide 9 depicting
standard deviation and it's impact. If the expected return
is said to be 6 percent with a standard deviation of 9, then
9 would be lost from the expected return of 6. A positive
standard deviation would be 6 plus 9 or a return of 15.
Highly unlikely events seen at the end of the graph somehow
occur even with low probability.
Mr. Bader described Slide 10, which illustrates the
correlation of asset class returns. The range of correlation
can be plus one to minus one. Plus one means the stocks move
together and minus one means the stocks move opposite of
each other. When asset allocations are reviewed, the
expected return of assets, the volatility of returns, and
the movement of returns in conjunction with each other are
all taken into account. The product of the exercise is what
is known as an "efficient frontier."
9:50:01 AM
Mr. Bader discussed Slide 11 and efficient frontiers. An
efficient frontier is a series of expectations where a
person determines the highest rate of return for the lowest
amount of volatility. The example shows a 100 percent cash
portfolio with low return and low volatility. On the other
side, 100 percent stocks show greater return with much more
volatility.
Mr. Bader reviewed Slide 12 and the current asset allocation
of the ARMB for the PERS and TRS legacy funds. He explained
that markets change and volatility is seen, however, the
fund is not automatically rebalanced.
Mr. Bader reviewed Slide 13 and the cumulative attribution
effects seen in September. He explained that the return was
a negative 12.89 percent. A negative 14.51 percent net
manager effect would have been seen if the target return had
been met, but the investment managers did better than the
established index or benchmark so the net manager effect was
positive.
Mr. Bader reviewed Slide 14 addressing the calendar year
September to September when the ARMB fund was in the top 23
percent of public funds. If the fund would have been all
fixed income the state would have been close to number one
because of the down market. He explained that years two and
three exemplify both up and down markets with good returns
for both.
9:53:36 AM
Mr. Bader presented Slide 15 regarding the impact of the
downward market on the expected rate of return and the
earning assumption of the PERS fund. He compared the base
used in 2007, assuming that the portfolio has a negative
22.24 percent, to the actuary for the retirement systems.
The actuary assumes that the fund will earn 8.25 percent. If
the beginning is down 22 percent adding the 8.25 percent
brings the fund down 30 percent. His estimate was that the
fund would have to earn 50 percent, which is a very unlikely
outcome.
Co-Chair Stedman understood that the actuarial target was
8.25 percent and the portfolio target was 8.11 percent. Mr.
Bader stated that the 8.25 percent is the actuarial
assumption over a long period of time, generally 30 years.
He admitted difficulty reconciling the ARMB target return.
The actuary considers the inflation assumption of 3.5
percent over the next 30 years. Mr. O'Leary's current
inflation assumption is 2.75 percent last year and this
coming year. There is a disconnect when looking at nominal
returns. If the chart were graphed in terms of real returns,
he opined that it would be close to the actuarial
prediction.
Co-Chair Stedman asked about the 8.25 percent which may be a
high estimate and require some response. He stated concerns
that market dynamics were moving away from 8.25 percent and
as the market moves down, the liability gap increases.
9:57:38 AM
Mr. Burnett outlined a comparison of major funds under the
permanent fund, the ARMB, and the projections of the
Commissioner of Revenue. He addressed asset values,
purposes, and market values for 12/31/08 versus current
market values. He used Slide 16 as a reference beginning
with the general fund. The market value for the general fund
fluctuates, but the primary difference in market value for
the general fund is appropriations out and revenue in. The
three year actual returns on the general fund are all in
short and intermediate term fixed income with a current
balance of $7 billion.
Co-Chair Stedman asked for clarification regarding dates.
Mr. Burnett answered that he was speaking of the 2008
calendar year.
Co-Chair Stedman asked for a definition of short term and
intermediate term. Mr. Bader answered that the short term
fund is similar to a money market fund, which is essentially
a 90-day account. Co-Chair Stedman asked if the holdings are
beyond five years. Mr. Bader explained that there are some
mortgages that reset. As interest rates fall and homes are
refinanced the mortgage portfolio is repaid quickly. If
interest rates increase, the portfolio could extend in terms
of length. Portfolios with asset backed securities are
subject to interest rate volatility and might have
investments over five years, depending upon the interest
environment.
10:00:52 AM
Mr. Burnett pointed out that $4 billion of the $7 billion is
money restricted for the public school fund and other
accounts for tax credits. The general fund has $3 million in
unrestricted funds.
Co-Chair Hoffman asked if the SBR exists in the general fund
category. Mr. Burnett answered in the affirmative and added
that the SBR also sits in the General Fund.
Co-Chair Stedman asked how the SBR is treated internally.
Mr. Burnett answered that the SBR is a part of the General
Fund and Other Non-Segregated Investments (GeFONSI) for
investment purposes. The earnings from the SBR flow to the
general fund.
Co-Chair Stedman reviewed that the SBR was funded last year
with $1 billion of excess revenue. A simple vote of the
legislature is required to access the funds. The earnings
and losses accumulate to the general fund. Mr. Burnett
agreed that the general fund would maintain a balance of $1
billion regardless of investment performance.
Co-Chair Stedman asked if the SBR was comingled within the
general fund? Mr. Burnett answered that the investments are
comingled.
Co-Chair Stedman asked if a particular gain or loss could be
identified for the SBR. Mr. Burnett stated that the SBR does
not have a separate asset allocation or target return.
Mr. Burnett continued to address the CBR (main fund), which
is the short term constitutional savings account invested
for moderate risk and intermediate investment horizon. The
CBR is invested at 100 percent fixed income: short term at 5
percent, intermediate term at 75 percent, and broad market
at 20 percent. The CBR has a calendar year return of 5.67
percent for 2008, a three year actual return of 5.71 percent
and a forecast return of 4.53 percent.
Co-Chair Stedman requested a definition of moderate risk and
intermediate investment horizon.
10:04:14 AM
Mr. Burnett answered that moderate risk is fixed income with
low volatility. The intermediate investment horizon is used
for less than five years and would not suffer large losses
if appropriated.
Co-Chair Stedman asked the duration of the CBR. Mr. Bader
answered that the target asset allocation was 20 percent
broad market, 75 percent intermediate term fixed income, and
5 percent short-term fixed income.
Co-Chair Stedman informed that the legislative body had not
decided how to respond to the revenue projection decline and
which accounts would be used to meet liquidity needs. It
appears that $1.3 billion will be needed for FY09. A high
likelihood exists that the CBR will be the source of that
need. Fiscal Year 2010 may incur a $2 billion deficit
putting the state at $3.2 to $3.3 billion and liquidating
the main fund of the CBR. He expressed concerns regarding
the policy implementation of the use of the CBR and the
structure preventing the liquidation of holdings that the
legislature prefers not to liquidate.
10:07:17 AM
Mr. Burnett answered that the CBR main account would be
liquid in a short period of time, at the stated value. The
CBR account is invested to reduce the risk of losing value.
He stated that when the legislature makes an appropriation
from the CBR in the beginning of FY09, the cash will not be
drawn out until some period in the future. Several months to
one year exist between the need for cash and the drawing of
appropriations to meet the deficit need. The main account of
the CBR is managed to reduce volatility.
Mr. Burnett introduced the CBR (sub-fund), which had a value
of approximately $3.4 million. The sub fund is a high risk,
moderately long investment horizon, and has an asset
allocation of 37 percent fixed income, 44 percent domestic
equity, and 19 percent international equity. The CBR sub
fund has a statutorily five year investment horizon. He
stated that the commissioner should consider not using this
money for a period of five years.
Co-Chair Hoffman asked when the value of the reported sub
fund of the CBR was $3.4 billion. Mr. Burnett answered that
the $3.4 billion was as of December 31, 2008.
Co-Chair Hoffman asked if the fund had been projected to
make money as of December, but lost $200 million since
December 31, 2008. Mr. Burnett stated that was correct
because the fund is invested with a five year time horizon.
The sub fund is high risk and the calendar return was nearly
30 percent negative.
10:11:07 AM
Co-Chair Hoffman stated he had recently asked the
commissioner of the Department of Revenue for a projection
of the remainder of the fiscal year. He could not remember
the exact amount although it was substantial. He explained
that the commissioner did not know if there would be
positive returns for the first 30 days, although his
inclination was that the state would see positive returns.
The committee is now informed that the account lost $190
million dollars in the first 30 days of the second half of
the year.
Mr. Burnett answered that he was not sure about the amount
in the sub account of the CBR on the day that the
commissioner was testifying to the subcommittee.
Co-Chair Stedman wanted the commissioner present to discuss
the policy question and the plans for managing the sub-
account of the CBR in the future.
10:12:15 AM RECESSED
10:21:42 AM RECONVENED
Co-Chair Stedman recognized that there had not been an FY10
update and the committee was flexible since the price of oil
was not determined. The price of oil could be $71 per barrel
or $40 per barrel. The legislature is in the policy process
of determining which sources of funds to address first. He
asked that the sub account be reviewed once more.
Mr. Burnett stated that the sub-fund of the CBR is invested
with a five-year time horizon, a high risk, moderately long
investment horizon. The sub-account is composed of 37
percent fixed income, 44 percent domestic equities, and 19
percent international equities. The sub-account has had a
calendar year return of negative 29.34 percent and three
year actual return of negative 5.17 percent, but it has a
target return of 7.61 percent. The sub-account began 2007
with a balance of $5.76 million and contained an additional
$4.1 billion added to it and now has a balance of $3.382
billion dollars as of January 31, 2009.
Co-Chair Hoffman requested the six month estimated returns
for the CBR.
PAT GALVIN, COMMISSIONER, DEPARTMENT OF REVENUE, answered
that he did not have the requested information with him. He
stated that the department uses target returns as the
projection for any period in the future.
Co-Chair Hoffman asked if the projections presented earlier
to the committee would remain accurate. Mr. Galvin answered
that the expectations are merely a projection and the
department is not vouching for the accuracy of the
projection. The department will continue to update the
committee with fund balances for the varying accounts
throughout the budgeting cycle.
10:27:22 AM
Co-Chair Hoffman stated that the fund had lost one billion
dollars for the first seven months. He asked if the
department would continue to invest in the same manner or
with a different strategy. Mr. Galvin answered that the
value of any investment strategy is consistency. The sub
account of the CBR will remain with a similar asset
allocation. The question, as he understood it, was whether
the department was planning to move funds between accounts.
His answer was that the sub account will remain with a
similar asset allocation in the current term.
Co-Chair Hoffman asked how this strategy fits into the
legislative policy of stretching the funds out as long as
possible. He asked for the anticipated longevity of the CBR
with 50 percent draws on the fund by the end of FY10. Mr.
Galvin answered that the department's responsibility is to
identify an appropriate mix between the main account and the
sub-account of the CBR. The department can anticipate the
direction of the budget process based on various decisions
made while understanding the savings accounts and where the
amounts will be taken from. Until other appropriation issues
have been settled the department will not know the projected
fund balances. The legislature's appropriation process
determines the use of the various funds.
10:31:38 AM
Co-Chair Stedman asked how the allocation rating was
modified and implemented last year from a policy and
physical perspective within the department. He queried how
the finance committee should interact with the
commissioner's office.
Mr. Galvin answered that the CBR sub-account was created ten
years ago with the statutory direction of a five year plus
target for the investment horizon. The intent was to have it
invested to provide higher return. The main account is
intended to cover the first five years before the need to
access the sub-account. Revenue has increased through the
last couple of years. A draw on reserves was not anticipated
and the reserve balances were growing. An interest existed
in seeing the returns on the reserve accounts maximized in
the appropriate way given the expected need of the funds. He
had requested that the issue be taken to the finance co-
chairs. The dilemma was whether to have the allocation
moved, remain in the main account, or be reallocated since
the main account was growing. He asked for feedback from the
co-chairs of the finance committees 12 months ago.
Co-Chair Stedman asked which finance co-chairs the
commissioner was referring to.
10:34:48 AM
Mr. Galvin responded he had spoken with Representative
Chenault and Representative Meyer of the House Finance
Committee, and with the current Co-Chairs of the Senate
Finance Committee .
Co-Chair Stedman asked if the commissioner recalled having
the discussion with him regarding changing the allocation.
Mr. Galvin answered that he did not have the conversation
himself, but requested that Deputy Commissioner Andrews
approach the finance co-chairs about this issue. He stated
that he was seeking feedback and asking for correspondence
stating the request of the finance co-chairs because the
House co-chairs were particularly interested in seeing a
more aggressive strategy with regard to the CBR.
Co-Chair Stedman asked what the response was from the Senate
co-chairs. Mr. Galvin stated that he was not engaged in
direct communication with the co-chairs, however, it was
relayed to him that the language would not come in the form
of a letter, but instead in budget language. The final
budget included language stating that the CBR deposits
should be invested to maximize returns, which meant placing
then in the more aggressive sub-account.
Co-Chair Stedman stated that his recollection of the
conversation with Mr. Andrews was that the senate finance
committee had not agreed to moving the funds into the sub-
account of the CBR. He remembered that the prospect was not
well received.
Senator Elton reported understanding moderate risk accounts
and the roll of outside advisors. He asked if there were
outside advisors consulted about the sub-account. He asked
whether the moving of money between accounts is an internal
process only or if other consultants advising about the high
risk component of the sub-account.
10:38:05 AM
Mr. Galvin answered that there are no consultations for
asset allocations. The asset allocation is developed with
the investment professional in terms of providing the asset
allocation to meet the statutory objective of the fund,
which is to have returns targeting a five-year horizon. The
goal is to have the investment remain fairly liquid because
the state may need immediate access to the funds.
Senator Elton understood the differences between the sub
account and the main account. He did not have an adequate
understanding of how investment decisions were made in
regard to the CBR and SBR.
ADJOURNMENT
The meeting was adjourned at 10:40 AM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AS 37 10 430.pdf |
SFIN 2/11/2009 9:00:00 AM |
|
| OLeary Responses 2-11-09.pdf |
SFIN 2/11/2009 9:00:00 AM |
|
| SB 256 CBR Intent.pdf |
SFIN 2/11/2009 9:00:00 AM |
|
| Senate Finance Presentation021109.pdf |
SFIN 2/11/2009 9:00:00 AM |
|
| OLeary Responses 2-12-09.pdf |
SFIN 2/11/2009 9:00:00 AM |