Texas Teachers $109 Billion Pension Fund Needs A Whopping 21% Return In Current Year To Preserve Adequate Funding Ratio

Tyler Durden's picture

While the University of Texas made headlines over the weekend for disclosing it had taken delivery of $1 billion in gold (albeit in a Comex warehouse in New York), another Texas fund is making waves today however for all the wrong reasons. As Bloomberg announces, "The Teacher Retirement System of Texas needs an annual return of 21 percent in the year ending Aug. 31 to maintain an 80 percent funded ratio, the level actuaries consider adequate to cover liabilities, said its deputy director." Needless to say, as Brian Guthrie, the fund's executive director admitted, “We’d have to have remarkable investment returns for the rest of the year to reach 80 percent.” Considering that the fund’s investment return was 14.7% in 2010, the best among large public pension funds, it is more than obvious that a major portion of the fund's 109 billion in assets as of April 1 is already in stocks. Which is why should the market swoon following the end of QE1, the best performing fund of 2010 may well be the worst performing fund of 2011. And even if by some miracle stocks surge enough to fill the performance void for the rest of the year, it is still not guaranteed that the fund will make up for the performance shortfall, even as pensioners' capital is likely tied in with such bloated, overvalued garbage as 4x+ beta, triple digit forward earning multiple stocks (full list of key equity holdings below).

From Bloomberg:

Even with the gains, the pension’s funded ratio -- the portion of promised benefits covered by current assets -- dropped to 81.3 percent as of Feb. 28 from 82.9 percent on Aug. 31, 2010, because of trading losses in 2008 and 2009 included through a process called smoothing, Executive Director Ronnie Jung said April 7.

Public pensions nationwide are grappling with about $3.6 trillion in unfunded liabilities, according to a 2010 study by Joshua Rauh of Northwestern University and Robert Novy-Marx of the University of Rochester.

Texas Teachers’ annualized return for the decade ended Dec. 31 was 4.8 percent, below the fund’s assumption of an 8 percent annual return.

Texas legislators are considering reducing the state’s contribution to the fund, which is now 6.64 percent of employees’ salaries. The Texas House earlier this month passed a budget that would cut general revenue spending by $4.6 billion, or 5.2 percent, during the 2012-2013 biennium.

The pdf below shows the top 500 positions in the latest publicly disclosed stock holdings of Texas Teachers per Thompson One.

Texas Teachers -

h/t Mike

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TheGoodDoctor's picture

Maybe they will talk to the folks from UT?

JPDG's picture

Hell yes.  Put it all in physical silver.  You'll beat out 21% in no time. 

knukles's picture

Take physical and it's a self-fulfilling prophecy.  
Cruise missiles trump Kodak. 

Mark McGoldrick's picture

No.  That would be totally idiotic. 

Not to state the obvious, but you can't eat silver.  

So what does that mean?  Physically backed silver ETPs (funds and products) have gathered inflows of over 350 tonnes this year, swelling the total to over 15,500 tonnes. This ETP supply is just sitting there - unconsumed and unused - and accounts for over half of all demand for physical silver.    


Demand for silver has been thoroughly distorted by these ETPs in the past year.  Unlike oil or corn or cotton or most other commodities, this silver isn't being consumed or used, so all that supply is just waiting to re-enter the market when demand corrects.  Then, you'll have a tsunami of supply which will absolutely crush the market. 

Anyone who wants to make a prediction on when it will happen is just lying. No one knows. Enjoy the ride while you can, because it will end - badly.


Harlequin001's picture

No Mark, but you can swap it for something you can eat, which is more than can be said for paper money which will not buy tomorrow what it will buy today.

Pension funds don't need to eat, they need to produce a store of wealth that pensioners can exchange for something to eat.

Mark McGoldrick's picture

You missed the entire point of my post. 

The point is looming, latent supply - not edibility. 


topcallingtroll's picture

I gotcha and so does escape key and.peceptive to name a few.

EscapeKey's picture

I what?? His post is a load of bollocks, silver IS being consumed by industrial processes. It doesn't just "sit there".

As for the inflow calculations, this would require either industrial use to have fallen off a cliff, or production to have increased significantly, either of which is questionnable at best.

Anyway, invest as you see fit.

Mark McGoldrick's picture

silver IS being consumed by industrial processes. It doesn't just "sit there...

No shit, sherlock.  That's why I said, ETPs "account for over half of all demand for physical silver."  The other half is used for industrial purposes, however, the majority is, indeed, "just sitting there". 

You guys have severe reading comprehension issues. 

Harlequin001's picture

'No. That would be totally idiotic. Not to state the obvious, but you can't eat silver. '

Hi Mark, not sure that I missed the point of your post at all.

The whole point of a pension fund is to preserve wealth, not provide food, for which silver is an ideal asset. You strike me as a person with an agenda. I have been advising many to invest in gold and silver since 2002. If we close out now we are doing find, better than these pension funds and much better than any stock market.

On what basis do you think that people are suddenly going to turn back to paper money at full face value? This can be the only basis of your claim for a route in silver prices is it not?

My understanding is that the looming latent supply is entirely inadequate to satisfy existing demand, never mind potential demand for a store of value even in these pension funds, never mind sovereign funds or even sovereigns as a new money

Michael's picture

I love the smell of complete and total economic collapse in the morning.

Harlequin001's picture

'Demand for silver has been thoroughly distorted by these ETFs in the past year.'

I agree, if you can get two people to buy the same thing at the same price then you have defeated price discovery. If you can get two or more investors to buy an ETF share instead of physical you have achieved the same result, which is precisely the function carried on by investment banks through short selling.

You can imagine the real price of silver if all the money that''s gone into ETF's, unallocated gold funds and derivatives had simply been invested in gold and silver bullion. No different to investors who think they are invested in wheat or corn when they are actually invested in the long side of a paper derivatives trade.

Massive price manipulation by any means. Should we be surprised that Singapore has just announced trading in cash settled gold and silver derivatives?

End badly? How can it end badly if it ends up where it started, in money? The tsunami of supply will be inadequate to fill the gaping void needed for a new global money...

Montgomery Burns's picture

Bwaaaahahahaaaaaa! Buy silver. 1 billion chinese can't be wrong.

Klaus Daimler's picture

You seem to make the implicit assumption that SLV et al actually contain the physical silver that they claim to.  This assumption may not be valid and could result in a paper, not physical, supply tsunami, which is, one could argue, what we have now.  Silver seems to be bearing up pretty well under the pressure.

Long-John-Silver's picture

Obama will bail them out with our tax money.

Cash_is_Trash's picture

Like that interview this week where Obama tells the dude to let him finish his answers.

Eat shit Barry

CPL's picture

Built on nothing but a wish that it was paid.  Congrats to the TUT.  You were suckered in by your own trap.  Canada is next btw as much as Leo loves pushing his crippled ass on.  Leo makes more than a working Canuck blowing in a tube...but he does do that he's early stage.  Next time the fucker is on stage I'll intro him a woman that works the phones...and doesn't lose billions on investments....yet cause shes hy friend I spot her.


Doubt the greek has cash to find that friendly.


It ok Leo, I'm going to split with all my four kids and place parachutes for my friends (not the morons or rich ones).  It's time to leave Canada.  Don't hold a bag too long my spanky.  Since you are the same as a Lebanese kid, no sense in telling you that.  It's shit your own parent won't tell you.  What you think Canada will look like and what the Irish think it will look like are two different stories.


Hopeully boston keeps their boats above shore...I'm out of here weather the communists or the fascists win next election.  Does matter.  You should understand your life is over those tiny ponds to the south.  But since you have no clue, cousins or "honour" what does it matter that your cousin gets skunked.


To all canucks:  We piss, bitch and moan about how the world is unfair.  It isn't.  Got clubbed in a G20 meeting.  Guess what?  You're not dead because they believed you have something to say another day.

Want to change it.  Kill people.

Since you weren't killed the first time around, guess what?  You get to extend the benefits of NOT KILLING.


So...anyone have an idea other than a working one?

Bearish News's picture

Damnit, I came here to say basically the same thing... "Surely they're mega-long precious gold and silver, no worries".

StychoKiller's picture

Face it teachers, do the math -- umm, you can do the math cain't ya??

Jay Gould Esq.'s picture

Only 21% ? A simple solution: Put it all in Lululemon, like all hedge fund cognoscenti.


tmosley's picture

Damn.  They better buy some silver.  Not sure gold is going to cut it, unless they go all in.

tiger7905's picture

Latest from Charles Nenner, see's silver taking a break medium term.


Popo's picture

When everyone believes something is going up (or down) is usually when max carnage happens.

...there are some serious neophyte investors around here that think silver 'always goes up'.

Here's a tip: there is no asset class for which that it true. Not one. None. Invest responsibly people....

paddy0761's picture

Better buy some gold then, eh?

High Plains Drifter's picture

where is leo?  he knows everything....

UninterestedObserver's picture

He was busy posting some crap article about the VIX 

High Plains Drifter's picture


i don't know where to put this, so i guess it goes here. its just too damn funny in a sad sort of way. people fighting over jobs at macdonalds. is this what we are about now? good grief......

lynnybee's picture

yes, it's call the "race to the bottom" , courtesy of WALL ST. & WASHINGTON D.C. policy over the past 30 years.    drive down those wages, outsource 8,000,000 jobs (with more to come unless we go into revolution).    What the hell did they expect would happen !!  it was all planned & deliberate, we are expendable.   


High Plains Drifter's picture

i got out of the big city in 2006. i thought it would happen pretty fast. so far, nothing yet, but i think it is coming. not sure when though. i made some mistakes trying to put a date on it before so now, I just wait, but I know it is coming. The cities will burn.

KickIce's picture

Sans the bailouts you were pretty much on the money.  If I have learned anything out of this mess it is to never under estimate the ability of politicians to kick the can down the road.

Our economy/government is like a boulder supported by toothpicks.  When it goes it will do so quickly.

knukles's picture

Blubber supported by us toothpicks?

KickIce's picture

Or in Pelosi's case, botox.

Caviar Emptor's picture

Yup. That was the plan. And they got more than they wanted: deflation. So now their thinking is not "how do we restore the real economy", it's "how can we create artificial inflation to mask the deflation?"

tickhound's picture



johngaltfla's picture

But don't worry, there is no municipal bond crisis coming.

The CNBC Infomercial Channel told me so.

KickIce's picture

Another reason for QE3, the state's unfunded liabilities will skyrocket without it, and why the unions are pumping DC for every dollar they can.

duo's picture

Why we need QE3.  Better a $10 loaf of bread than a pension shortfall.

Freddie's picture


You may need a wheelbarrow full of Obam notes for a loaf of bread soon.

Slipmeanother's picture

they try and steal your wheelbarrow

PulauHantu29's picture

They NEED a 21% return....think of all the other funds that performed less stellar then UT's Teachers' Fund.....they will NEED an 80% return.

This is why a Whopper of a QE3 will be had to keep these funds from going Belly Up...imho.

disabledvet's picture

QE is guranteed then.  "Or not."  I still feel like "at best we're 50/50" no matter what given the simply "point blank" AWESOME logic of this argument.  That is why I prefer the "illogic of money."  Do i have to explain "what happens when you wave a red flag in front of bull?"  why?  "is the bull a slave because that's SUPPOSE to be a STOP SIGN?"  they say "he loses everytime."  i agree with that.  sometimes though "he kills that phucker with the red flag" and the crowd goes friggin WILD.  and then he "gets a cool pad in the Spanish country-side with all the hotties he wants--and even some he doesn't!"  and honestly--wouldn't you want that?  I mean "c'mon on over here Soledad O'brien and give this bull a little love."  Just SOUNDS cool, doesn't it?

SilverRhino's picture

21% yield?   Better buy some silver bitches.   ($44 (Ag current) / $29 (Ag 1/1/2011) = 51% YTD.  

Nothing else is even in the same ballpark.

disabledvet's picture

Greek two years are at 20%.  I agree "it shouldn't be that easy."

knukles's picture

Where's Harry when we need his recommendation?

topcallingtroll's picture

I havent seen the real harry in a long time. He shouldnt be so sensitive. Come back harry wanger.