Institutional Investor's Alpha Magazine - February 2009 - (Page 49)

Profile Britt Harris Native B After two decades away from his home state of Texas, Britt Harris is back — bringing an East Coast attitude to the stodgy but politically charged T eacher Retirement System in Austin. By Steven Brull ritt Harris went home in 2006 to revive the giant Teacher Retirement System of Texas. After two decades back East, where he’d run Verizon Communications’ pension fund and served as CEO of quantitative investment manager Bridgewater Associates, the Bryan, Texas, native took one look at the more than $100 billion TRS portfolio and saw a dangerously narrow, all-too-basic mix of stocks and bonds that urgently needed shaking up. Harris had a personal interest at stake: His 73-year-old mother, Allana, a retired ﬁfth-grade science teacher, receives a $1,200 check from TRS each month at her home in Mesquite. When he interviewed for the job of chief investment ofﬁcer, Harris was blunt: He told the board of trustees, which oversees the system and hires its CIO and executive director, that he would take the position only if he could make widespread changes. “It wasn’t an ultimatum, but I wanted to tell them ahead of time that ‘if you hire me, this is what I’ll want to do,’” says Harris. “My approach has never been incrementalist.” Harris’s recipe was simple and sweeping — diversify out of plain-vanilla stocks and bonds into a wide range of alternative investments, from hedge funds to real estate to commodities, and hire outside portfolio managers. Run in-house in Austin, the stock and bond investments generated indexlike returns at low cost for domestic securities, but left TRS at a disadvantage when it came to trading emerging-markets and other alternative instruments. Revamping a portfolio now worth just under $81 billion and covering 1.2 million active and retired members can’t be done overnight, and today Harris has completed only part of his radical overhaul. From the start he’s had to contend with hothouse local politics, from a meddlesome governor to a legislature wary of potential conﬂicts of interest and of surrendering too much control. In 2007 the legislature trimmed Harris’s target allocation for hedge funds from 10 percent to 5 percent while authorizing TRS to hire outside managers to run 30 percent of its publicly managed stocks and bonds. (Harris preferred no constraints.) Still, Harris has been remarkably effective. He has mostly achieved his new allocation goals, placing nearly 58.5 percent of assets in global equities; 22.8 percent in stable value assets, such as long Treasuries and intermediate-maturity government credits, hedge funds and high-yield bonds; and 18.7 percent in real-return assets, including Treasury inﬂation-protected securities, commodities and real estate. In so doing he has made a keen impression on his FEBRUARY 2009 • INSTITUTIONAL INVESTOR’S ALPHA • 49 Return of the

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - February 2009

Institutional Investor's Alpha Magazine - February 2009 Contents Letter From the Editor Longs & Shorts Digging Out A Call to Mentor Dicey Detroit The Constant Skeptic Cover Story: The Undaunted What Were They Thinking? Dark Days in Greenwich True Stories from the Commodities Files Return of the Native The Quest for Cover Moving On from Madoff

Institutional Investor's Alpha Magazine - February 2009

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