by Michael R. Wickline, Arkansas Democrat-Gazette
The Arkansas Teacher Retirement System’s trustees on Monday voted to authorize the system to wind down its investment in the Bermuda-based Aeolus Keystone fund, which specializes in property catastrophe insurance coverage.
As of June 30, the system had about $185 million invested in the Aeolus Keystone fund, said P.J. Kelly of Aon Hewitt Investment Consulting, which is the system’s general investment consultant.
Kelly said Aon Hewitt recommends that the system decline renewal of the January and midyear Aeolus Keystone investment funds and allow the system’s investment exposure in the funds to wind down, which he expects to happen in summer 2022.
“Aon’s opinion is that Aeolus is taking on unnecessary risk to achieve their desired returns, which was exemplified most recently by their outsized losses from Hurricane Ida,” Kelly wrote in a Sept. 14 memo to three system officials. “Additional concerns surround the weak performance and below-market terms, particularly related to higher than market fees and lack of a high-water mark.”
But Kelly said Aon Hewitt continues to believe that exposure to the insurance-linked securities market is an attractive investment for the system’s portfolio and that it will continue to monitor the landscape for potential investments that complement the recently approved Pillar Juniperus Opportunity Fund.
Last month, the trustees authorized an investment of up to $95 million in that fund, which invests in insurance-linked securities. Bermuda-based PillarCapital Management Limited is the fund manager.
The Teacher Retirement System is state government’s largest such agency, with more than 100,000 working and retired members. Its investments are valued at roughly $21.2 billion, said system Executive Director Clint Rhoden.
TEMPORARY CONSULTANT
In other business, the trustees authorized the system to hire Global Principle Partners as a temporary consultant for its direct investments. The system had no applicants when it issued a request for proposals for a direct investment consultant.
The system will contract with Global Principle Partners for $55,000 a month for about six months until a long-term consultant is hired after the issuance of another request for proposals, said system Deputy Director Rod Graves. He said he hopes the long-term consultant that is hired will cost less each month than Global Principle Partners.
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