Committee approves bill to raise ERS alternative-investment cap to 10% and boost firefighters' pension cap to 20%

A legislative committee approved a substitute bill to allow the Employees' Retirement System of Georgia (ERS) to increase the cap on committed alternative investments from 5% to 10% of a fund's portfolio and to raise the Georgia Firefighters Pension Fund cap from 15% to 20%.

The committee voted to pass the substitute after hearing from Jim Potvin, executive director of the Employees' Retirement System, who reviewed the program's history and performance. Potvin said the legislature passed the enabling statute in February 2012 and ERS began investing in alternatives in February 2013. "We have had success. We have a nice 12 year track record now of good success in these investments, and we would like to loosen the reins just a little bit and be allowed to invest with a cap of 10% of our portfolio," Potvin said. He described the 10% limit as a cap on committed capital, noting that "with a 5% limit on commitments, we may only be invested 3 to 3 and a half percent" at any given time.

Potvin described the alternative investments as primarily private equity and real estate and said their 12-year average returns have outperformed ERS's public equity returns by about 4 to 4.5 percentage points per year. In the discussion a committee member summarized that public equities and fixed income make up roughly 45 to 50% each of pension assets and that alternatives would form the remaining balance under the proposed change.

The substitute also adds language specific to the Georgia Firefighters Pension Fund, increasing that fund's allowable share of such investments from 15% to 20%. According to the committee discussion, the firefighters' fund "has a pretty robust track record," which was cited as rationale for the higher limit.

Committee members identified the Senate substitute as building on language from Sen. Albers' bill and on language from Representative Leland Franklin's bill; the committee chair said the author and the House bill author were both sitting in Senate Rules. The committee voted without further comment; the motion was moved and seconded and members voiced "aye." The chair announced the measure "passed unanimously."

Committee discussion also clarified how commitments work over time: capital is committed to alternative investment vehicles and called over periods of time, so a higher committed-cap limit provides flexibility even if the immediately deployed share of assets is lower. Potvin framed the change as conservative relative to peer funds.

The committee did not record named individual vote tallies in the transcript beyond the chair's announcement that the motion passed unanimously. No amendments or conditions to implementation were recorded in the committee discussion included in the transcript.