The Texas State Board of Education met on Friday to wrap up its week of meetings and ended up briefly discussing the topic of BlackRock managing Permanent School Fund assets.
Board member Tom Maynard (R-Florence) explained that the SBOE recently rebalanced its investment portfolio, eliminating two asset classes in the emerging market space, both of which were managed by BlackRock.
Ten years ago, it may have been wise to invest in emerging markets, Maynard said, but America’s purported political instability has increased the risk of those investments. The board aimed to “de-risk” the fund and made a bigger commitment to investing in private credit.
“The problem is, according to the law, BlackRock is on a boy-cotter list maintained by the comptroller because they have engaged in certain practices that work against oil and gas, that work against [the Texas Permanent School Fund Corporation (PSF)],” said Maynard. “It’s in the best interest of the PSF to stand shoulder to shoulder with our legislature and comptroller and not only honor the letter of the law … but also to fulfill the spirit of the law and not do business with those companies.”
Until BlackRock is removed from the comptroller’s boycott list, Maynard said the board would no longer invest in it or hold assets it manages. He said that the PSF plans to reinvest the $8.5 billion managed by BlackRock into something with less risk.
Although Maynard reiterated that the decision to divest from BlackRock was purely a fiduciary one and not at all political, other board members were not so quick to agree.
“We still hold BlackRock in our portfolio, and oddly enough, it’s in oil and gas,” board member Patricia Hardy (R-Fort Worth) pointed out.
Board member Rebecca Bell-Metereau (D-San Marcos) alleged that the divestment had little to do with fiduciary duty.
“It seems to be this is a case that somehow feelings were hurt, and this is a matter of politics rather than a financially sound decision,” she said.
Maynard responded, “I would add that the decision we made was a fiduciary decision that was supported by our highly capable investment staff. Moving out of the emerging market space is something many public and private funds are doing, as well as moving into private credit. It is purely a fiduciary decision.”
Board member Marisa B. Pérez-Díaz (D-San Antonio) spoke in favor of the disengagement with BlackRock.
“I support sustainable energy and those investments, but I will also reacknowledge the fact that we need to reinvest in Texas, and this provides us the opportunity to invest with partners in Texas that represent a diverse section of this sector,” she said. “This was not a political decision made by the board.”
Board chair Aaron Kinsey (R-Midland) said he believes the new allocations are a better solution and stated that these decisions were not made without extensive meetings on the topic.
Friday marked the conclusion of the board’s week-long set of meetings. The next sessions are scheduled to take place June 25-28.
