Senate committee approves bill to raise ERS cap on alternative investments from 5% to 10%

Senator Albers, speaking to the Senate retirement committee, presented Senate Bill 23 to increase the Employee Retirement System's (ERS) cap on alternative investments from 5% to 10% and the committee voted to pass the measure by voice vote.

The bill's sponsor said the change would allow ERS to expand allocations that currently include privately managed real assets and other alternatives. "Today, they are allowed to, take up to 5% of the money they manage, and they can use that, in alternative investments. This just takes that to 10%," the sponsor told the committee.

Supporters cited a long-run performance advantage from the systems' use of alternatives. A representative identified in the hearing as Mr. Popkin, describing the fund's managers and process, said internal staff perform screening and evaluation and then partner with outside general partners; the bill's sponsor added that, since alternatives were first added in 2013, the aggregate return has been "between 4 and 4 and a half percent higher than all the traditional returns." Committee members pressed for more detail on recent allocations and returns; Popkin said a moratorium prevents disclosure of decisions less than a year old but that older investment listings could be provided to committee members before a floor vote.

Senators on the panel asked several clarifying questions: Senator Orban asked for three- and five-year return figures; Senator Mangum asked whether private contractors were used (the sponsor and Popkin said internal staff conduct decision-making and they partner with external general partners); Senator Goodman asked about farmland and depreciation and was told the ERS has not invested in agriculture and focuses on companies and distressed assets rehabilitated for resale.

The sponsor also noted that other Georgia retirement funds have different allocations: the Police Officers' Annuity Benefit Fund (POAB) was described as having a 15% allocation to alternative investments. Committee members were given a verbal assurance that the sponsor's office would provide a listing of older alternative investments and returns to committee members ahead of the floor vote.

A motion to pass the bill was made, seconded, and advanced by unanimous voice vote.

Details including who may manage specific assets, the precise holdings under the alternative allocation, and the disclosure timing for recent investments were discussed but not resolved in committee; the sponsor and staff said additional documentation would be supplied to members before further action.

The committee took no further action at the hearing beyond voting to advance the bill; any fiscal or legal limits beyond the cap change were not specified in the transcript.