Florida State Board of Administration Investment Advisory Council Report: March 19, 2012

Today, March 19, 2012, Florida’s State Board of Administration (“SBA”) Investment Advisory Council (“IAC”) met in Tallahassee, during which it considered several items as part of its agenda. 

Chairman Rob Gidel opened the meeting, whereupon Ash Williams was reappointed as SBA Chief Investment Officer. 

Mr. Gidel made a motion regarding human capital risk, which provides a recommendation to the SBA Trustees to review compensation and adequacy and allow the IAC to hire outside counsel to address related needs.  The motion was approved unanimously by a voice vote.  Also, David Grain was elected as Chair of the Council, succeeding Mr. Gidel.

Mr. Williams provided a report on various topics, including the SBA’s Audit Committee, General Counsel, Corporate Governance, and Risk Management and Compliance.  He noted that the Legislature approved a bill that would allow the SBA to double its alternative investment portfolio.  He also noted that a proposal to reduce the Florida Hurricane Catastrophe Fund (“FHCF”) had failed. 

Following Mr. Williams’ presentation, the IAC discussed four items: Major Mandate Performance Reviews, Asset-Liability and Asset Allocation Review, Strategic Investments Program Review, and Proposed Rules for 2012 Corporate Governance Principles and Proxy Voting Guidelines. 

The meeting materials are available by clicking here. 

The major mandates outperformed their respective benchmarks over all longer time periods through December 2011, with an exception of the Florida Retirement System Investment Plan and the CAT Operating Fund, both of which slightly underperformed. 

The FHCF assets are invested in high-grade securities and experienced subdued returns.  The Asset Liability and Asset Allocation Review included a recommended policy that offers long-term cost savings of $2.1 billion, with a modest reduction in risk.  A lower-risk alternative offers savings of $1.6 billion, with a more substantial reduction in risk.  The strategic investments policy is to generate long-term incremental returns in excess of a five percent annualized rate of return.  The SBA perspective of governance is to maximize economic value and promote and protect shareholder rights. 

The next IAC meeting is scheduled for June 25, 2012.

To listen to an audio recording of today’s meeting, click here.