The Teacher Retirement System of Texas’s proposed new office in Singapore is taking shape and is expected to house four staff initially, internal documents show.
In a presentation published on Friday, chief investment officer Jerry Albright outlined how the move would provide cost savings, facilitate closer Asian market awareness and deeper local relationships, and benefit from subsidies from the Monetary Authority of Singapore.
However, it might take longer for the $153 billion state pension to generate a profit in Asia than in Europe because of cultural differences, he warned.
Albright did not reveal the identities of the team members being considered for transfer to the new Singapore branch but said $300,000 a year could be saved by relocating a trader from its Austin headquarters.
A spokesman for Texas Teachers, when asked by AsianInvestor, declined to comment on when exactly the new office would open and the extent to which there were plans to hire locally.
Albright said the fund would seek to replicate the success of its London operation for its $22.2 billion of assets in Asia, having been "on this track [towards setting up an office in the region] for a number of years".
The UK office was set up in 2015 to focus on private market investments in Europe. Since then, the operation has sourced 212 opportunities representing $22.6 billion in deal flow, with 66 of those coming last year, totalling $7.7 billion in value.
Texas Teachers' international expansion is occurring at the same time as it moves to build up its in-house capabilities, so it can do more direct deals and allocations and also slash the fees paid to external managers.
It aims to almost double its internal investment headcount over the next four years, reflecting similar ambitions among other large asset owners, such as the California State Teachers' Retirement System.
The Texas fund's strong focus on investments in private equity, real estate and infrastructure is understandable: these assets have been the main drivers of returns in recent years. Its private market portfolio beat its benchmark by 206 basis points on a three-year rolling basis, as of the first quarter of 2019, having targeted an outperformance of 155bp.
Its public equity portfolio, meanwhile, has underperformed its benchmark over one, three and five years.
The Texas Teachers spokesman told AsianInvestor he could not comment further on the Singapore plans beyond what appears in the published presentation. “To that end, I can’t discuss specifics on location, staffing or costs at this point – not until the board of trustees has approved all that,” he said.
The fund had initially also considered Hong Kong as a potential Asia base. Other large investors have also made the Chinese territory their regional headquarters, such as Canadian public-sector retirement fund managers CPPIB, Ontario Teachers' Pension Plan and PSP Investments, the latter just this year.
Asked why the Texan fund now favours Singapore, the spokesman said: “We won’t comment on questions of this nature.”
In any case, it is easy to imagine that the prevailing political turbulence in Hong Kong will only have strengthened the pension plan’s preference for the Lion City.
LONDON STILL CALLING
Not that the political turmoil in the UK has swayed Texas Teachers away from its conviction that London is the best venue for its European office.
Concerns were raised in April by some board members over Britain’s vote to exit the European Union about whether it was wise to retain the presence in the UK capital. But in the published internal committee report Albright assured them that it had good prospects and was seeing strong results.
The fund even plans to move to a new location in London to take advantage of the Brexit turmoil, given office leases are now potentially as much as 40% cheaper than was the case in 2015, he added.
The pension plan is also looking to add staff in the city, having recently added a second real estate professional to take its headcount to five, according to a fund spokesman.