One member of the Texas Permanent School Fund (PSF) Corporation’s board of directors wants more Texans to manage investments made on behalf of the state’s sovereign wealth fund.
Aaron Kinsey, who sits on the board and is also a member of the State Board of Education (SBOE), outlined his position during Thursday’s meeting of the PSF Corporation’s board, arguing that the organization should hire individuals and companies that have a stake in Texas succeeding.
“The State [of Texas] is a world leader in finance and has countless qualified emerging managers. We should be investing in managers who share the same long-term interests in our State, not those who seek to grow by gaining favor with international bureaucrats while torpedoing large sectors of our State’s economy,” Kinsey explained in a memo he distributed to board members.
As previously reported by The Dallas Express, the state’s PSF — which is used to help fund public education in Texas — consists of approximately $56 billion in assets, about $9 billion of which is managed by BlackRock. The company’s status as an external manager of PSF assets stoked controversy at previous board meetings because Texas law, in most cases, forbids state contracts with companies that effectively engage in boycotting oil and gas companies through the practice of ESG investing.
Kinsey proposed that the PSF Corporation find Texas-based investment managers instead of looking outside the state. Texas-based managers should be preferred, according to Kinsey, who said during the meeting that “their incentives [would be] aligned with us. They live in our communities. Their kids go to our schools.”
He also recommended that the organization review all new and up-for-renewal contracts to ensure compliance with the state ban on doing business with firms practicing ESG investing. Kinsey also suggested that the board consider adding a significant allocation for mineral and royalty investing, which he claimed had “very little volatility” compared to some of the fund’s other investments.
Tom Maynard, a fellow SBOE member and chair of the PSF Corporation’s board of directors, did not initially appear supportive of Kinsey’s suggestions, stating, “It is our job to invest for return, and nothing else.”
An earlier presentation given to board members reported on the performance of BlackRock in its capacity as an external manager. The report claimed that the BlackRock-managed part of the fund had outperformed its benchmark in 30 out of the last 40 quarters. However, more recent quarters logged lower performance relative to the benchmark.
Still, Maynard seemed to soften his stance somewhat later in the meeting. He thanked Kinsey for raising the issue of finding external managers that shared the state’s long-term interests and claimed that he would pick a Texas firm over ones based out-of-state if he thought they were the best for the job.
“We are working in an environment, unfortunately, where investment is becoming weaponized in certain ways. … Five years ago, we would never have [had] this discussion, but we have that discussion now. … Thank you for that,” Maynard said.
As previously reported by The Dallas Express, Kinsey and Texas Land Commissioner Dawn Buckingham stressed that the PSF Corporation to take greater care with the fund’s assets, many of which are tied to the state’s oil and gas industry, which has been targeted by activist investors looking to divest from fossil fuels.