TEXPERS Pension Observer Vol. 4 2022

THE OFFICIAL MAGAZINE OF THE TEXAS ASSOCIATION OF PUBLIC EMPLOYEE RETIREMENT SYSTEMS | VOL. 4, 2021

Gotta' Get'em All!



MOVING AT0L5IGHT SPEED UP0F6R-0O8NT

TEXPERS' Board President recaps Snippets of the latest research and
a year of pandemic recovery and trends impacting pensions and

legislative monitoring. retirement. Plus, a story on the loss
of a Texas pension defender.
10-12

AN AUGMENTED REALITY

How TEXPERS added a digital points 13-14
program to its Annual Conference
and gained global recognition. QUESTIONS & ANSWERS

15-16 A San Antonio advocate says
positive board dynamics can
BALANCE SHEET deliver successful results for
defined benefit pension funds.

The signs are clear. Storage units
are in strong demand.

17-21

BEST PRACTICES

Pension industry management,
development, and cybersecurity
advice from industry thought leaders.

OurBoard. AboutUs.
The Texas Association of Public Employee Retirement Systems is a
President Jim Smith voluntary nonprofit association that provides education and legislative
San Antonio Fire & Police Pension Fund advisory services to the trustees, administrators, professional service
providers, and employee groups that manage the retirement money of police
1st Vice President Sherry Mose officers, firefighters, and municipal and district employees in cities across
Houston Municipal Employees Pension System Texas.

2nd Vice President Jose Cavazos TEXPERS has 68 member pension systems that manage $32.7 billion in
Dallas Area Rapid Transit Retirement Plan & Trust retirement assets for 57,728 active members and 60,737 retirees and
beneficiary annuitants. Any public employee retirement system of Texas is
Treasurer Larry Knott eligible for membership and encouraged to join.
Dallas Area Rapid Transit Retirement Plan & Trust
TEXPERS’ past and present membership has consisted of police and fire
Secretary Carla Brewer departments, municipal employees, airport authorities, hospital districts,
Dallas Employees' Retirement Fund regional planning commissions, river authorities, transit authorities,
community colleges, and university medical centers. TEXPERS membership
Board Member Terry A. Bratton also includes investment and brokerage firms, actuaries, and general
Houston Police Officers' Pension System businesses that provide services to pension funds as permitted by association
bylaws.
Board Member Paul R. Brown
Big Spring Firemen's Relief & Retirement Fund It is important for trustees and administrators to voluntarily give their time
to strengthen and enhance their pension fund management skills. As such,
Board Member Tyler C. Grossman TEXPERS supported HB 13, enacted by the 83rd Legislature, and participated in
El Paso Fire & Police Pension Fund the Pension Review Board working committee that developed the Minimum
Education and Training Program. The MET Program has been approved by the
Board Member John D. Jenkins PRB and was effective January 1, 2015. In turn, TEXPERS developed the Basic
Dallas Employees' Retirement Fund Trustee Training class, which fulfills the requirements of the Program, and
offers it at least twice yearly prior to our conferences.
Board Member Larry Reed
San Antonio Fire & Police Pension Fund TEXPERS is dedicated to making high-quality, low-cost and convenient
training available to our members. We believe that it is critical to advancing
Board Member David Stacy the excellence of Texas public fund management and the public’s confidence
in trustees and administrators to manage their retirement systems
Our Staff.MidlandFiremen'sRelief&RetirementFund prudently.

Executive Director Art Alfaro TEXPERS conducts an Annual Conference each spring and a Summer
Educational Forum in August each year. Along with the Basic Trustee Training
Director of Conferences & Events class, we offer additional focused workshops designed around the current
Carolyn Butterworth, CMP topics or trends focused on public fund management and investment issues.
We also conduct various seminars, workshops, and field trips throughout the
Membership & Finance Supervisor Lena Terrell, CAP year.

Director of Communications & Event Marketing TEXPERS education and training provides one avenue to assist trustees with
Allen Jones maintaining their knowledge of state-of-the-art pension fund management
techniques and changes in the law or court decisions concerning pension
Member Services Specialist Samantha Polsgrove funds. In addition, they serve as a focal point for the exchange of ideas and
best practices among participating members across the state.
Contact Information
The TEXPERS Pension Observer OAduvriAssosrso.ciate
C/O Texas Association of Public
Employee Retirement Systems
1504 San Antonio St., Suite 206

Austin, Texas 78701
Telephone: 713-622-8018
E-mail: [email protected]

Copyright © 2021. TEXPERS Pension observer is the official
magazine of TEXPERS, published quarterly. Contributions to
TEXPERS Pension Observer are welcome, but the right is
reserved to select material to be edited and published.
Publication of any article is not to be deemed an endorsement of
the views expressed therein, nor shall publication of any
advertisement be considered an endorsement of the product or
service involved.

UPFRONT
COLUMN

PTEAXNPDEERMSICSPAENNDDMSO2N0I2T1ORREINTGURSNTIANTGE FLREOGMISLATURE

TERM AS PRESIDENT FEELS AS IF IT IS 'MOVING AT LIGHT SPEED'

It has felt like everything we deal with as an at other funds to see what they have done and implement all or in part those
organization has been moving at light speed since I policies to best assist them in their unique needs.
was elected to serve as TEXPERS' board president
this past spring. It has been an honor. On a related note, Art and I just had the pleasure to attend the TLFFRA
conference. I commend the TLFFRA Board of Directors for organizing a great
This is the last issue of TEXPERS' Pension conference. There is so much we both learned and can implement at future
Observer, our membership magazine, for 2021. As TEXPERS events.
far as public pensions are concerned, the year has
been quite busy - one that included a return to The biggest lesson I learned is that we all have special needs, both small
business after a devastating global disease and a and large funds. It is incumbent on TEXPERS and all member funds to be ready
to lend a helping hand should anyone need it.
legislative session in Texas.
First, I want to thank TEXPERS Executive Director Art Alfaro for his I believe our plans diversity, be it Public Safety, Municipal, or Authority
plans, only makes us stronger as an organization. My goal as president is to
excellent leadership and management skills in maintaining the protect our current plans, make them stronger for our current and future
association's daily operations and successfully leading our wonderful staff retirees, and bring all of our organizations together as a unified front.
in completing two outstanding conferences.
I also want to convey my gratitude to our many sponsors who make our
I am very proud that TEXPERS was one of the first organizations across conferences possible. Would you mind letting us know what you would like to
the nation to conduct an in-person conference after the COVID-19 pandemic see take place at future TEXPERS events? You have a unique perspective,
resulted in social distancing measures. I believe I can speak for everyone having attended many events throughout the country.
who attended our events; it was so great to see many of our friends and
colleagues in person. I have asked Lisa Ivey Miller to serve as my presidential advisor.
Fortunately, she graciously accepted. Lisa is well known to many of you and
It was a pleasure to see everyone gathered for networking and has contributed to TEXPERS' values and will continue to do so.
professional development and seeing everyone smiling and laughing with
each other. Everyone was just so happy to meet outside of the virtual Going forward, the entire board and staff need help from you, the
world. The conferences felt like big family reunions. membership. We need your best ideas of what you expect from TEXPERS.
Would you mind letting us know of speakers you may have heard previously?
We had a wonderful Annual Conference May 23-26 in Austin. Pulling off Also, let us know of topics you would like us to address.
the event was no easy task. Some of our members continued to face travel
restrictions. Others still had general apprehension about being around large Please feel free to reach out to our board members, staff, sponsors, and
crowds due to the pandemic. especially members of any funds if your fund needs assistance or guidance.
We have a lot of brilliant folks who are part of our entire membership. We will
Once we wrapped up the spring session, TEXPERS staff quickly prepared continue to get stronger as long as we stay unified and continue to educate
for our Summer Educational Forum Aug. 29-31 in San Antonio. As per the ourselves to prepare us for any issues we may face in the future.
norm, they did a great job, and our event was a huge success.
Should anyone ever want to reach out to me dealing with any concern,
As for Texas' 87th legislative session, fortunately, public pensions complaint, or compliment, please call or email me. In closing, I want to repeat
weathered it with minimal damage. I want to give Eddie Solis, the the honor and privilege it is to serve as president of this great organization.
association's lobbyist from HillCo Partners, a huge shoutout. I have known
Eddie for many years now, and I believe there is no one better in the Stay strong, stay safe, stay healthy. May God bless you and your entire
business when it comes to navigating legislative issues at the Capitol. His family,
advice and counsel are invaluable to our many organizations and members.
Jim Smith
The TEXPERS board is making a concerted effort to work with the Pension
Review Board (PRB). This state agency oversees state and local pensions Jim Smith,
regarding their actuarial soundness and compliance with state laws. TEXPERS Board President
TEXPERS wants to work with the PRB as a team in dealing with legislative
issues.

I firmly believe the PRB has the same goals as TEXPERS, maintaining and
enhancing our retirement plans. Both organizations want everyone to
succeed.

Having spoken many times with Anu Kumar, the PRB's executive director,
she has stated that they realize that what works for one fund may not work
for other funds. With all of the information collected by the PRB, they want
to act as a resource for funds should they need help and desire to take a
look at best practices throughout the state.

In many cases, there is no need to reinvent the wheel. Still, funds may
need help developing policies and other procedures where they could look

TEXPERS PENSION OBSERVER www.texpers.org | 5

UF

RESEARCH POLL

FSASUITLNTANCETDEREIN,2NLA0VO0TECI5SVA:TERLMSEPEPTENRONTIRSPSTILOIENND MARAEJNO'RTIPTUYTOTFINTGEXMPOENRESYSIUNRTVOECYRRYEPSTPOONDENTS

State and local retirement plans In TEXPERS' September 2021
accumulated assets of $5 trillion in Outlook newsletter, we polled our
defined benefit pension plans and $531 members asking if their funds are
billion in defined contribution plans bringing cryptocurrency into
through the first quarter of 2021, investment portfolios.
according to a new analysis published by
MissionSquare Research Institute. In the unscientific survey, of the 47
Formerly known as the Center for State respondents, 53.2% said, "No," 27.7%
and Local Government Excellence, the indicated their funds "haven't
institute noted that despite the early decided," and 19.1% marked, "Yes."
economic impact of the novel Coronavirus ■
pandemic, the average funded ratio
among state and local pension plans CONTEST
remained stable at 72% for retirement
systems included in the Public Plans CPEONMSPIOETNITFIUONNDOINPGENSSTRFOATREINGNIEOSVAAWTIAVREDPUBLIC
Database.
Have an innovative idea that can reduce cost
The information is presented in volatility, promote intergenerational equity and
MissionSquare's new report, "Public Plans assure that pension plans remain on a strong
Database - Snapshot as of September fiscal path over time? It could net you $5,000.
2021." Moreover, the share of plans The National Institute on Retirement Security and
contributing at or near their full the Conference of Consulting Actuaries are
actuarially determined employer hosting a new award competition looking for
contribution, or ADEC, remained high, innovative public pension funding strategies.
according to a news release issued by the Entrants are given a hypothetical pension
institute. That is despite decreasing from scenario and asked to design a funding policy.
85% of all plans in 2019 to 83% in 2020,
according to MissionSquare's findings. Submissions are due online by 11:59 p.m. ET on
Monday, Jan. 10, 2022. A three-judge panel will
"From 2001 to 2020, the actuarially select up to three funding strategies and award
determined contribution expressed as a $5,000 for each winning submission. Guidelines
percentage of payroll has more than
doubled for all payroll sizes, and it is ■and eligibility information is available at
highest among the plans with the lowest
covered payroll," according to the https://bit.ly/InnovativeFunding.
institute's news release.
TEXPERS PENSION OBSERVER
Public pension funds are investing in
alternatives such as private equity, real
estate, hedge funds, and commodities
three times more than they were in 2005,
according to the analysis. The Public Plans
Database showed that 28% of the assets
of public retirement systems were in
alternative investments as of August
2021.

The database is an organized collection
of public sector retirement plans
developed and maintained electronically
in a computer system collaboratively by
MissionSquare, the Center for Retirement
Research at Boston College, the
Government Finance Officers Association,
and the National Association of State
Retirement Administrators.

Approximately 95% of all state and
local pension assets and participants are
contained in this database, covering 210
of the largest state and local defined
benefit plans. The collaborative expanded
the database in 2020 to include
information from public sector defined
contribution retirement plans, according
to MissionSquare's news release. Most
but not all of the 210 plans featured in the
institute's report had 2020 data available,

■depending on when their fiscal year

ended.

6 | www.texpers.org

UF

IN MEMORIAM

FLEOGRAMCEYRATSEXDPEEFRESNDBEORARODF SMEECMUBREERRLEETAIRVEEMS EBNETHIND
WRITTEN BY ALLEN JONES

On the Retirement Frontline until the next election in 2018. A video of Michael
TEXPERS Board Member Paul Brown says Curran Curran's memorial
HAILING FROM OHIO, MICHAEL CURRAN MADE HIS service is available
HOME IN TEXAS, WHERE HE WORKED TO MAKE SURE was a staunch supporter of public employee pensions. for viewing on the
PUBLIC EMPLOYEES RECEIVED THE PENSION BENEFITS "He was a great man," says Larry Reed, a current Facebook page of Pat
THEY WERE PROMISED. member of the TEXPERS Board who served with H. Foley & Co. Funeral
Curran. "He was a quiet man; however, when he spoke, Service & Cemetery.
Michael J. Curran, a former member of TEXPERS' his opinions were highly regarded." Visit
Board of Directors, died on Oct. 5. www.facebookcom/P
But pensions aren’t all he was known for, according atHFoley. Curran's
A Houston resident, Curran, 75, worked as a CPA for to those leaving notes to his memorial page online. He video was posted on
the Metropolitan Transit Authority of Harris County. was also an avid golfer. Oct. 13 or search for
After he retired from the transit authority, he became "Michael Curran
an active member of TEXPERS and served two full Reed and other TEXPERS members frequently Memorial Service" on
terms on its Board of Directors between 2006 and played golf with Curran. While retired, Curran scored the funeral service
2014. three holes-in-one. company's page.

John "JD" Davis, who served with Curran on the Curran was born and raised in Ohio, according to his
TEXPERS Board, says he "was a dedicated trustee to obituary posted to DignityMemorial.com. He earned a
all public employees, and he never forgot the bachelor's degree from the University of Cincinnati
responsibility that came with his position." Davis and served in the US Army Reserve. Before making his
posted the comment to a memorial page set up to way to Texas, he lived in Colorado and Kansas.
honor Curran, whom he called his friend. He met his wife, Leslie Bay Steen, when he moved to
Houston. The couple liked to travel and going to
"I was always glad to see him, and I am sorry I didn't casinos, according to the obituary.
get to shake his hand one more time before he
crossed over to be with all our friends on the other He often had dogs around. And he was known to be
side," Davis wrote. "Rest peacefully, dear friend." a family man, devoted to his nieces and nephews. He
is survived by his wife and his stepchildren, Sean
Curran was elected in 2006 and re-elected in 2010 Kristian Steen and Karl Oddvar Steen.
to the Board's Authority/District Position No. 10.
Denise Crandon succeeded him in 2014. However, in A memorial service honoring Curran took place on
2017, the Board called on Curran to fill the position Oct. 13 in Houston. The family is asking friends and
again after Crandon announced that she could not colleagues of Curran to leave online condolences on
complete her term. A staunch supporter of public his memorial page: https://bit.ly/3v9grhz.
employee pensions, Curran agreed to fill the position
■Remembrances will be used in a keepsake for the
TEXPERS PENSION OBSERVER
family, according to the site.

S"EII EHDWIIHASDISNMH'AA,TTLNAIGWMNDEDAETOY.IN.TS.AEO"MGMSLHSOAAORDKERTEROY

John "JD" Davis

AasllseoncJiaotnioensiins2d0ir1e7c.toCroonfnecoctmwmituhnihciamti@onasllaenndjoenveesn1t9s7m4aornkeLtininkgedatInT.EXPERS. He joined the
www.texpers.org | 7

UF

TRIBUTE

RFuanlpdhoMnaArusghu(sptic1t7u.rFerdoambolevfet,acreenDtearv,ihdoLladnintgripp,laPqeutee)Nagc,cGeeprtaerddaDpalnaiqeulse,oMfarrescho,gCnhitaiiornBfrreotmt BtehsesBeolmaradno, SftTerpuhsteeneWs ohfittehheeHado,uDstaovnidFRirieefgiogrhatenrdsA’ RlbeeliretfinaonMd Rayesti.rement

TEXPERS HONORS RALPH MARSH FOR HISTORY OF PROTECTING PENSIONS

WRITTEN BY JOE GIMENEZ

At its summer conference in San Antonio, TEXPERS honored Ralph Marsh friends throughout my career,” Marsh says. “Most importantly, I have been
for his 30 years of involvement with retirement security for public
employees. Marsh had announced his retirement from a seven-year stint as ■particularly blessed with a wonderful family that has supported me as I
executive director at the Houston Firefighters’ Relief and Retirement Fund
in early August, but his service to pension funds spans decades. pursued my passions. To all of you, keep up the good work.”

“When I began my career over 40 years ago, I never dreamed that I would fJfuuonneddGsciiomnmecmnriesuiznsiicssaiattuipoauntbsiol.incHsereahlnaadtsipoaunsbssliipcsrtoaeffdfeasTisErsiXo.PnEaRl wShaondspseecviearliazleTseixnapsepnesniosnion
become passionate about helping public servants prepare for retirement,”
Marsh says. “By pure luck, I discovered the public retirement world. I think
what sparked my interest was the intense passion the trustees and staff of
public pension plans across the country had for helping and protecting their
members. The time, energy, loyalty and dedication trustees give to their
current and retired co-workers has always inspired me.”

Marsh served in the Houston Police Department for 33 years, the last 30
of which he served as an investigator in the intelligence division. He’d
served the cause of retirement security for Houston police in two
capacities.

For 20 years, he served as Chairman of the City of Houston's Deferred
Compensation Advisory Committee, which oversaw the City’s Section 457(b)
plan. Simultaneously, during his police service, he was on the Board of
Trustees of the Houston Police Officers’ Pension System for 19 years.

For three years, he served as President of the HPOPS Board. He was also
elected by police members of TEXPERS from around the state to serve as
their representative to the TEXPERS Board.

He retired from HPD and left HPOPS to serve Houston firefighters as the
executive director for its pension fund.

But that’s not all. Ralph was a past President of the National Association
of Government Defined Contribution Administrators (NAGDCA) and had the
distinction of being the first to have ever served as President of that
association twice, first in 2006-2007 and again in 2012-2013. He has served
as chairman of the Board of Governors of the International Foundation for
Retirement Education.

In recognition of Marsh’s service, the Houston firefighters’ pension fund
arranged to have a flag flown over the U.S. Capitol in his honor and asked
Governor Greg Abbott issue a proclamation in his honor.
“I have been blessed with so many wonderful colleagues, mentors and

8 | www.texpers.org TEXPERS PENSION OBSERVER

The TEXPERS365 APP

INTERACT WITH YOUR ASSOCIATION ON
YOUR MOBILE DEVICE TODAY!

An Augmented Reality

TEXPERS ADDS DIGITAL POINTS PROGRAM TO CONFERENCE



WRITTEN BY JOE GIMENEZ

During its Summer Educational Conference in April, TEXPERS unveiled its digital collectible, an
electronic token emblazoned with the association's red, white and blue Texas-shaped logo.
The digital token is a first among pension associations. TEXPERS uses it and an augmented
reality smartphone application to educate pension system members about electronic currency
and improve conference sponsorship giveaway opportunities.

10 | www.texpers.org TEXPERS PENSION OBSERVER

There is a digital token for TEXPERS. But what is it and how can it
be used? Tokens are codes that represent the rights of their
holders. A token can be traded for services or goods, or used as a
reward. Tokens are like those plastic chips you would use to get a
beer or food from a festival market. As an alternative, digital
tokens can be exchanged for electronic gift cards or other rewards
from conference sponsors.

TEXPERS began its first test of an augmented reality program one more incentive for our conference attendees to engage with the
during its Summer Educational Forum, held April 29-31 at the Grand advanced educational content we provide."
Hyatt River Walk hotel in San Antonio. Augmented reality, the
intersection of real-life with technology applications, was used to Through this pilot program, TEXPERS became the first pension
enhance the event's educational programing and member association to create an educational digital collectible, a type of
hobnobbing with conference sponsors. digital token designed to show that someone has ownership of a
unique virtual item. Digital collectibles are like online pictures or
About 52 conference attendees downloaded the phone-based trading cards. Proving ownership of original content can be its own
PointsVille app to collect reward points and converted the points into reward.
educational badges and gift cards. TEXPERS members scooped up
rewards by walking to virtual coin collection spots within the Grand The PointsVille program engaged TEXPERS members in a treasure
Hyatt hotel's conference floor. Or they earned point rewards by hunt styled after Pokémon Go, the global gaming sensation that
watching educational video content uploaded by points sponsors. allows players to use their smartphones to "capture" virtual
"TEXPERS will always stay true to its core, educational mission," says creatures in the "real world," such as landmarks and hangouts,
Art Alfaro, TEXPERS' executive director. "The PointsVille program is around them.

TEXPERS PENSION OBSERVER These types of augmented reality programs use the GPS on a

www.texpers.org | 11

person's phone to show the locations of tokens or rewards. The hunter moves
to the spots to collect them in a digital wallet, which their phone's GPS
confirms.

Through PointsVille, players can earn points for viewing a video
presentation through the app. After collecting a certain number of tokens, the
points convert into gift cards, discounts on products, and any other
promotions that rewards-sponsors create for the hunters. The idea is to
encourage PointsVille participants to move about in the real world while
experiencing the program's virtual reality.

TEXPERS members collected points by being in specific conference
presentations and visiting the promotional marketing booths of various
sponsors.

PointsVille itself is a platform, like any application on a smartphone. The
app enables sponsors to create gamified rewards easily and quickly for
certain user behaviors.

The program is becoming popular as it expands to sponsors with diverse
business interests. As an example, in April, PointsVille partnered with the
Pittsburgh Pirates to offer season ticket holders gamified loyalty points. The
ticket holders discover and acquire points through attendance, playing
phone-based games, and participating in campaigns with the club. The
Pirates fans can then redeem those points in Major League Baseball's
Ballpark app for merchandise, memorabilia, and exclusive events.

Gabor Gurbacs, the founder and chief executive officer of PointsVille, was
on hand at the TEXPERS summer forum to roll out the program and
participate in a panel discussion on cryptocurrencies.

"PointsVille is honored to provide tools to foster better financial education
in Texas, nationwide and globally," he says. "We believe that our solution
may benefit a broad range of public and private participants."

“Sponsors like the program because it increases their engagement with
customers and prospects. It gives them something to talk about,” Gurbacs
added.

According to Alfaro, TEXPERS' executive director, the program will further
enhance the value conference sponsors receive from the association.

"We can offer our sponsors a really nifty and meaningful way to draw our
members – the trustees and administrators of Texas pension funds – to their
booths and presentations," Alfaro says. "TEXPERS is demonstrating its
commitment to stay current and relevant to its members and sponsors. ■

JfpueonnedsGicoiomnmfeumnneudznsiicsinaatciporiunsbsisl.icHsierteuhlaaattsiiooannssssiapsnrtodefdpeusTbsEliXiocPnaEafRlfwSaiharosn.dspseecviearliazleTseixnapsension

TEXPERS members used the PointsVille app on their phones to
locate coin collection spots within the Grand Hyatt hotel's

conference floor, as illustrated at left. Alternatively, they could earn
points by watching educational videos uploaded by points
sponsors, as shown in the screen shot above.

QUESTIONS & ANSWERS

RsSuaEcncEAeDnsts:ofnCuiloOreaLsduvLlotAcsaBftoeOr sdRaeyAfisnTepIodOsbiteNinveeIfSbitopKaerEdnsYdiyonTnafOmunicSdssUcaCnCdeEliSveSr

INTERVIEWED BY JOE GIMENEZ

Larry Reed started his pension advocacy journey in 1985 when he was first elected as an active firefighter representative to the Board of
Trustees of the San Antonio Fire and Police Pension Fund. The Board encouraged the City of San Antonio in the late 1980s to amend the
pension fund’s governing statute to create a contribution schedule that would amortize the unfunded liability below 30 years. They
accomplished that through steady, yearly increases from pension members, which currently stands at 12.32% and which the city continues
to double match to this day. SAFPPF is now 89% funded and has a 12-year amortization period.

Reed was elected to the SAFPPF Board as the Firefighters Retired He also served on three different teams in contract negotiations
Representative in 2004, and just this spring, was re-elected for with the city.
another term. In addition, Firefighter Pension Funds across Texas
elected Reed as a director of the Texas Association of Public Employee Question: Why did you become a pension fund Trustee?
Retirement Systems from 1998-2005. In 2010, he was again elected to
the TEXPERS Board of Directors and serves on that Board as well. He Answer: It was a combination of factors. When I joined the San
has also served on the Board of Directors of the Generations Antonio Fire Department in 1973, I noticed how many of many fellow
Community Federal Credit Union for over 30 years. firefighters had to work until they were 65 to accumulate enough of a
pension benefit to retire. Then they would retire and pass away two
Reed is a 1976 graduate of the University of Texas-San Antonio with or three years later. I thought to myself that life has got to be better
a bachelor’s degree in Finance. He currently serves on the Disability than that. I wanted to see the pension fund work better so that
Committee and is chairman of the Investment Committee. firefighters did not have to work to 65. That’s too old for a firefighter.
It did not serve the public safety interest of San Antonio either.
He also dedicated 10 years on the firefighters local 624 board, with
five of those serving as treasurer. www.texpers.org | 13

TEXPERS PENSION OBSERVER

Q&A keep busy enough with the pension fund and other matters
while also enjoying leisure time.
Q: When did you start to work on your observation? Q: What advice can you offer to other pension funds?
A: I’m not a fan of Actuarially Required Contributions for
A: In 1976, as a firefighter, I went back to college part-time pension funds. The consistent, steady contributions of the
and earned a finance degree from the University of Texas at city and our members have worked well for us. ARCs tend
San Antonio. That gave me a good idea of financial to create contribution holidays when markets and the
principles which a pension fund could use. In 1983 there economy are down. And that is when pension funds need
was an opening on the Board. I ran against three or four the contributions the most. The gradual approach toward
other guys and was the top vote earner, but I lost in the achieving increased, set contributions over decades has
run-off. About two years later, that person left the worked well for our pension fund.
department, and so I ran again and won. So it was 1985 Q: What would you tell a young firefighter who’d earned a
when I first got on the Board and began working with my finance degree today and got on a pension board?
fellow Board members to try to improve the pension fund. A: Don’t be fooled by the promise of defined contribution
plans that require individual decision-making. There are far
Q: What was going on? too many people who retire with a 401(k) plan right when
markets tank and their savings are lost. Or they make bad
A: Well, at the time, the pension fund was not doing very decisions along the way. The main factor for pension fund
well. It was 60% funded and had an infinite amortization success is the 30-year investment time horizon to which
period, meaning it was poorly funded. There were negative their investment committees commit. Individual investing
headlines about our financial health. Since our pension in 401(k)s isn’t the same. Don’t be fooled by long bull
fund is in Texas statute, we had to go to the Legislature to market runs and the damage which bear markets can do to
make changes. individual portfolios. Pension fund boards with steady

Q: How did that go? ■contributions from members and their sponsors can make

A: We worked with the city, the retirees, and the police and the best of the downturns. Individuals don’t.
fire unions to come up with a plan that gradually increased
contributions by members and by the city. The idea was JpTeoexneasGsioipmnefenunsneidozncisofumanmpdusubnilniicccarrteiisloainstsiso.intHuseaphtriaoosfnesassassniiodsntpaeuldbwTlhiEcoXasPfpfEaeRicrSsiaa.lnizdesseinveral
that over time we could improve the fund. The key was that heJfPFtLoguhaiiiiflemrmvenfereneicrdcsySSiastn'eiseamnRo.hdndpneaiistrestAPFherodnouau,sa,tsnlnsiirotdcwdtihgneee.ehinToeoatthfro,,esf
gradual approach. It was a real team effort, and my fellow
Board members at the time worked really hard to make the TEXPERS PENSION OBSERVER
changes that were eventually passed into law. The success
that we’ve had, in terms of now being 89% funded and with
a 12 year amortization period, resulted from the gradual,
consistent contribution schedule of the city and the
members.

Q: Why did you run to be a TEXPERS director?

A: San Antonio’s executive director, Carlos Resendez,
worked to form TEXPERS back in the late 1980s, and I
decided to be a part of that. As the third-largest city in
Texas, San Antonio was big enough and important enough
to represent the future of defined benefit plans on the
TEXPERS board. That was one reason I was a member of
TEXPERS.

Q: Why should public employees earn a defined benefit plan
instead of a defined contribution plan?

A: The main thing for police, firefighters, and municipal
employees is the protection that DB plans provide families
with death and disability benefits. Defined contribution
plans don’t cover that. And you can’t outlive your assets in
a DB plan. Your family can’t outlive your pension benefits if
something happens to you on the job. The defined benefits
are there.

Q: What has a defined benefit plan meant for you in
retirement for the last 20 years?

A: I retired at age 49 when I was offered the Executive
Director position for the pension fund. That was a little
early, and I probably would have stayed on into my mid-
50s. But the main thing has been that the defined benefit
plan has helped me with a stable, predictable income and
for which I can plan for and stay within. It allows me to

14  | www.texpers.org

BALANCESHEET

BEDRTHOEOMSISGNOSNATRHEE CMLAERAKRE. TW, ISTTHOLRITATGLEEUSNPIATSCEAFROERINEDXETRMAAND.

Did you know that more than 1 in 10 WRITTEN BY DAN KRYZANOWSKI souls that house displaced persons
Americans use self-storage? This is twice leverage storage as they rearrange their
as many as twenty years ago, with some Now (or sometimes 1, 5, and even 10 years homes and apartments. Once again, the
post-Covid studies claiming 12%, according down the road) is not the “right time” to sell heart drives this decision, with storage
to Public Storage and SSA Panels/Straw Grandpa’s piano or dispose of the night providing an outlet for those in need.
Poll from September 2021. stand Grandma brought over from Europe.
Emotion trumps financial logic, with the Dislocation. The “unknown unknown”.
With this sharp increase in demand, it is a storage industry providing a (very Unexpected layoffs and imminent job loss
fair to assume that publicly traded profitable) service to the family. can seriously derail an individual’s - and
companies and large private entities would especially a family’s - housing situation,
own a majority, of the ~50,000 facilities Divorce. Even the most amicable of both in terms in how much square footage
across the United States. The reality though divorces result in one party moving, with they can afford and if they can remain in
is far, far away from this assumption — and emotions driving the decision to ‘throw the same neighborhood. Emotions are
within the truth, lies tremendous away and burn everything’ or hoard all acute, with desire to “not change” high.
opportunity. valuable possessions. In addition, much like Storage provides a hedge for the affected
the wedding registry, friends and family person/family to possibly remain local and
Over 80% (4 of 5) storage facility are may provide the new divorcee more stuff keep their possessions, resulting in some
owned by mom-and-pop operators. This is (including their old stuff!). On the flip side, sense of stability in a challenging time.
a wild figure in a “wild, wild, west” industry. more complicated divorces may mandate
In addition, in comparison to say that shared possessions be moved out of There is a 5th D, however, and it is
community banking, regulation is light and the house and into storage. relevant to the continued growth of
local, with little-to-zero barriers to stand storage demand and increasing rental
up a new facility or take over from a Disaster. The “known unknown” in prices: Decluttering. Covid may have only
current owner. certain parts of Texas is not IF, but WHEN been the tip of the iceberg of how “space
disaster will hit. Hurricane Harvey is a deprived” the living situation has become
What are the “4 D’s” and why do they devastating example of what may become for families and multi-tenant
continue to drive the omnipresent demand of your house and possessions, with some arrangements. In lieu of truly living like a
for storage? Death, Divorce, Disaster, and of these items needing to end up
Dislocation. Let’s take these one by one. temporarily in storage. Likewise, the kind www.texpers.org | 15

Death. The passing of a loved one, even
when expected, is always in some aspects
unexpected with memorial services and
larger ticket items (i.e. Trust & Wills)
prioritizing the time of the mourning family.

TEXPERS PENSION OBSERVER

BS

hoarder, the only option to provide an office or sleeping space, is to shift essential possessions into storage. By “essential”, I am not
referring to the plastic Christmas tree (though storage does make a nice home for this $50 tree 11 months of the year), but more so winter
jackets and past year tax returns.

With Wall Street and private money cannon balling into the residential real estate market in recent years, it is very likely that rents will
rise considerably with 100 square feet of self-storage seeming like a bargain compared to renting an extra bedroom. The cherry on top, is
that there is nearly zero supply of “extra bedroom” apartments or houses. Once again, storage wins.

Overall, storage is not a complicated business, though the “10,000 hour” still applies when choosing an operator. While the publicly traded
REITs have experienced teams, the true alpha is found in the private regional operators. John Manes, CEO of Pinnacle Storage Properties, is a
perfect example of a Texas-based owner/operator who first learned the industry for a decade before launching his own operating and
management companies. John recently sold 14 properties (1.2m sq ft, 6,600+ units) to a publicly traded REIT, with Pinnacle’s investors

■earning a multiple upon exit, in addition to years of distributions in the 6%-10% range.

DpraenviKoruyszlyanleodwcsokmi imsearnciaacltrievaelceasptaittael rinaiitsieart,iveeqsuiftoyroGwEnCear,paitnadl ipnaMsseixviecoinavnedstSoor,ugthenAemraetriincga,deonutbelrein-dgigtihteysietlodrsavgieaisnedlufs-sttryoriang2e0.1H3e.

Global Self-Storage Market Value to Grow to $64.71B by 2026: Firm
TEXPERS STAFF - Worldwide, the self-storage market was valued at $48.02 billion in 2020, according to advisory firm Mordor Intelligence. The
firm expects the value to grow in the next six years. to $64.71 billion.

In a market review posted to the firm's website, Mordor expects the self-storage market to see positive growth due to increased urbanization
and improved economic outlook. Also, Mordor report indicates that the work-from-home trend of 2020 drove up the demand for self-storage to cut
out on office rent space as more companies decided to shift toward remote work models.

■The remote work trend and increase in self-storage was especially felt in metropolitan Asian cities where office space can be costly, according to

the advisory firm.

16  | www.texpers.org TEXPERS PENSION OBSERVER

BESTPRACTICES

Board DiversityMANAGEMENT

WTHILELTSIMHEARFEOHROCLHDAENRGSESITSENPOUWP?,
WRITTEN BY EDUARD KORSINKSY, ESQ. & ADAM T. SAVETT, ESQ.
white. The data is somewhat limited, as only about 10 percent of S&P
Much ink has been spilled, much breath expended, and many 500 companies explicitly disclose the race of individual directors.
hands have been wrung over the last decade on the lack of diversity Anecdotal data suggests that the companies that do disclose the
in corporate boardrooms. That chorus only intensified over the last racial composition of their boards may, in fact, be more diverse on
year as protests over racial inequity poured out into the streets of average, strongly suggesting that the true diversity numbers are
cities across the country. even lower than the sample suggests.

While companies continue to make progress, hundreds of US The issue matters. Research published by Vontobel Asset
publicly traded companies still have an all-male board of directors. Management reveals that public companies with the most ethnically
Board gender diversity has been accelerating, but female directors diverse boards performed better than their peers. Specifically,
continue to represent just 18.5 percent of the total population of Vontobel found that the most diverse boards generated a higher
board members across the companies comprising the Russell 3000 five-year EPS growth than public companies with the least diverse
Index, an increase of only 4.2 percent since 2016. According to a boards.
recent report from The Conference Board, 13.4 percent of Russell
3000 companies do not yet have a single woman on their board. In response to the frustrating pace of change in Corporate America,
Board leadership roles are also not equally open to women – less institutional investors have become even more active in calling for
than 5 percent of companies in each of the Russell 3000 and S&P increased boardroom diversity in their portfolio companies. Laudable
500 indexes have a female board chair, and less than 20 percent of as those efforts may be, they have often been measured steps, which
board committees in the Russell 3000 are led by women. may not yet represent transformational changes, but may result in
long term movement.
The Conference Board's report also revealed that for companies
that explicitly disclose the race or ethnicity of their boards of Before the start of the 2020 proxy season, the Office of the New
directors, a staggering 80 percent of those board members are York City Comptroller launched the third phase of its Boardroom

T20EX | PwEwRwS.tePxEpeNrSs.IoOrgN OBSERVER TEXPERS PEwNwSwI.OteNxpOeBrsS.oErRgV| E17R

BP

Accountability Project, expressly calling out companies that do not Scrutiny of board diversity practices will only continue to
have a policy requiring women and minorities to be included in the intensify, driven by both the lead of prominent asset managers and
initial pool of candidates when selecting new director nominees, the increasing demands put on public companies by state and
similar to the so-called “Rooney Rule” pioneered by the National federal legislators.
Football League. In response, 20 companies actually enacted a
broader version – requiring consideration of women and One of the historical hurdles to achieving greater board diversity
racially/ethnically diverse candidates for both director seats as has been a supposed lack of qualified candidates. That narrative is
well as the CEO role. false, but is rooted in a historical preference for board members to
come from the C-suite. Women and diverse candidates have, of
In releasing its “Investment Stewardship Engagement Priorities course, been underrepresented in the C-suite for decades. While
for 2021,” BlackRock noted that they “expect boards to include progress continues to be made there as well, for the overall
directors with diverse personal and professional experiences” and composition of boards and the pool of board candidates to better
where they “consider a board to be insufficiently diverse, we may represent the diversity of the country, boards and companies will
vote against directors on the nominating and governance committee need to look for talented directors outside their traditional fishing
or equivalent for an apparent lack of commitment to board holes.
effectiveness.”
Empirical data strongly suggests that corporations, and their
CalPERS has identified “Board Quality: Diversity, Independence investors, will be better off in the long term as these trends
and Competence” as one of the five core issues that they believe continue. A recent academic study cited by BlackRock found that an
have a long-term impact on risk and return in their “Governance & increase of just 10 percentage points in the representation of
Sustainability Principles.” While those principles do not yet include female directors on a company board was associated with a
a “Rooney Rule,” CalPERS asks portfolio companies to annually statistically significant increase in the number of patents that
disclose the “demographic information including race, ethnicity and issued and the level of subsequent research citations for a given
gender” of the board. R&D expenditure.

In their 2021 US Proxy Voting guidelines, Glass Lewis announced With increasingly insistent prodding from asset managers, who
that they will generally recommend against the nominating have placed diversity front and center in their corporate
committee chair of a board that has no female members, and will stewardship initiatives, the proof will very likely be in the pudding.
note as a concern boards that have fewer than two female The key remains, as always, for institutions to continue to work
directors. Beginning in 2022, Glass Lewis will up the stakes, and
generally recommend voting against the nominating committee ■together to press for change, as there is strength in numbers.
chair of a board that has fewer than two female directors. Glass
Lewis will also look at whether a company has a “Rooney Rule” in iSPLpE2nLoad0ysPrsru0ttt,tia3fntaeorue.mdnlAtrioiaslKaosstnnoLioodmaLr,nsClhCoaci,enrollaeis-sfefpokeenolufyctaufnsu,tnedEfrmdcioestetrodiqiermvn.CsoeiitdOfslfoyeiLRrt.rsmehEtiveghMtineMh&oeiarandKtininottfavooorgserrhiiimsnnnetggselmpkdeyinnt
place. While they will not make voting recommendations solely on
that basis in 2021, it will “help inform our assessment of a LACSeodyvmasimtm&eumTKn.osiSrcLsaaLivtnCieso.ktntys,LaELnsPdqa.InnosdvteCitrOsuRetieEosnMaol nRietsoerianrgch for
company’s overall governance and may be a contributing factor in
our recommendations when additional board-related concerns have
been identified.”

Change is brewing at the legislative level as well. Following on
the heels of California’s Senate Bill 826 and Assembly Bill 979,
which mandated companies headquartered in that state to have
specified levels of representation of women and people from an
“underrepresented community” on their boards, New Jersey,
Massachusetts, and Washington have all introduced their own
legislative proposals setting a female quota for public company
boardrooms. While that is a step towards ensuring board diversity,
such efforts focusing exclusively on gender are well off the bar that
California has already set.

18  | www.texpers.org TEXPERS PENSION OBSERVER

BP

CYBERSECURITY

CPAYNBEDRECMIIRCMDIINDANL'ST:SRIEDPEOLIRNTE

RESOURCES AVAILABLE TO KEEP YOUR FUND INFORMED

WRITTEN BY ALLEN JONES institutions, and governments. With those kinds of targets,
trustees and administrators of public pension systems and their
Even though the novel Coronavirus pandemic slowed down life financial service firms, consultants, and vendors might want to
for businesses in 2020, it did not deter the ambitions of investigate resources to protect the sensitive information they
cybercriminals. In fact, according to the FBI's 2020 Internet Crime keep.
Report, cybercriminals pretty much seized the pandemic as an
opportunity to "profit from our dependence on technology to go As public employee retirement plans, administrators, trustees
on an internet crime spree." and vendors are responsible for sensitive information impacting
the finances of hardworking state and local government workers.
The FBI's Internet Crime Complaint Center, also referred to as Funds are tasked with defending their funds and the sensitive
IC3, received 791,790 complaints in 2020 - a record for the information of their members against cyberattacks and that
bureau. The reported losses totaled more than $4.1 billion. The starts with understanding the risks associated with cyber activity.
total complaints received in 2020 is a 69% increase from 2019,
according to the IC3's report. Cybersecurity involves not just protecting a system's computer
network but its devices and data from unauthorized access. As
The most costly complaint was business email compromises, more and more devices rely on computers and the internet (e.g.
totaling approximately $1.8 billion in losses. Phishing scams were email, smartphones, tablets, social media, apps, navigation
also notable, according to the IC3, totaling 241,342 complaints, systems, credit cards, bank records, vendor documents,
with losses of over $54 million. investment contracts), the more knowledgeable funds and their
vendors need to be in protecting those items.
Probably one of the most news-getting forms of cybercrime
were ransomware incidents, during which a type of malware TEXPERS has put together a list of a few resources that might
threatens to publish a business's data or perpetually block come in handy as pension system leaders continue to grapple
access to it unless a company pays a ransom. with cybercriminals:

Worldwide, there were 304 million ransomware attacks in The Internet Crime Complaint Center, or IC3, has been
2020, according to an annual report on cyber security. There operating since 2000 as an arm of the FBI. The public can file
hadn't been a higher amount since 2016. complaints of suspected internet-based criminal activity
through the center's website at www.ic3.gov. The site's FAQ
Among the top ransomware attacks worldwide included hits explains what happens in the filing process and provides
against healthcare organizations. Recently, a woman filed a consumer and industry alerts. It is a good resource for smaller
lawsuit against the hospital where she gave birth, alleging her fund administrators who may not have enough staff to keep
baby, born with severe brain injury, died because the facility up with the latest cyber scams.
mishandled a ransomware attack, according to a NBC News
report. www.texpers.org | 19

Other targets included financial organizations, educational

TEXPERS PENSION OBSERVER

BP There are many other resources available. A quick search on a
web browser is sure to bring up hundreds of links. Look for
Attend webinars and online courses. There's a wealth of reputable sites, including those from local colleges and
training online to learn about cybersecurity - from the basic universities.
to the advanced. Fees range in pricing, but some courses are
available for nominal fees, and introductory lessons are Some smaller pension funds may consider having a staff
sometimes offered free. Check sites such as Coursera.org and member or trustee receive cybersecurity training. Local colleges
Udemy.com. If you are on social media platform LinkedIn, its and online universities usually offer paid programs that are often
Learning programming has various cybersecurity courses. You worth pitching in to enroll a staff member to earn a certificate.
may have to sign up for the social media site's paid
membership program to gain access. An alternative choice, visit the National Initiative for
Lean on your fund's service providers and vendors. They often Cybersecurity Education's website at www.nist.gov and look for
have strong cybersecurity programs and may offer free its Online Learning Content, which lists free and low costs online
advice. Don't hesitate to call your representatives and ask to cybersecurity learning opportunities. Among the programs are
be introduced to their IT professionals to see what you can
learn from their expertise. Some may even be willing to make ■those for employee awareness training and others for career and
presentations to your fund's staff or board of directors.
Visit the Cybersecurity & Infrastructure Security Agency at professional development.
www.cisa.gov. The site offers a wealth of information on
safeguarding against cyber threats. The CISA is a government TA@EllaXelPlneEnJRjooSnn.eeHsse1isj9od7ini4reedocntthoLerinoakfsecsdooInmc.imatuionniciant2io0n1s7a.nCdoenvneencttswmitahrhkeimting at
agency that works to defend against threats and collaborates
to build a more secure and resilient infrastructure, according
to its website.

BP

DEVELOPMENT

FCTFOOEOXRRNPTF2EEW0RR2OSE2RNHATCENHEAN,DTUSXA,TLO rate, which expires Friday, March 11, 2022. If you do not
receive a response within the required time, you should
PNLOAWNNISINTGHEYOTIUMRETTROIPSTART ask your boss for a personal meeting to request
permission to attend the conference. It is a good idea to
WRITTEN BY ALLEN JONES submit the letter several weeks before the room rate cut-
off date because your boss may need time to consider the
Even though TEXPERS' next conference registration isn't open request. And be sure to keep a copy of the letter for
yet, it's a good idea to start planning for the association's largest yourself.
and most-attended event where you'll learn about industry trends, Figure out what you want to get out of the event. Your goal
master new skills, and make new connections. might be to expand your network of peers. Or, you may want to
learn from the speakers. Do you want to pick the brains of your
TEXPERS is hosting its Annual Conference April 3-6, 2022 at The peers about a specific issue at your organization or maybe talk
Worthington Renaissance hotel in Fort Worth, Texas. Attending the with vendor sponsors about their services? Are you hoping to
conference is one of the best things you can do for your service to a meet with a specific person? The sessions you chose and the
public employee retirement plan as an administrator, trustee or people you talk to all depend on your reason for attending the
investment manager. conference. Once a preliminary agenda is made available closer
to the conference, make note of the types of sessions and when
The state of Texas doesn't simply encourage professional there will be built in times to network. The TEXPERS365 app
development for public employee pension trustees and also will allow you to build your schedule once the agenda
administrators; it mandates it. TEXPERS makes it easy to state becomes available there, too. Depending on your reason for
mandated training, continuing education, professional attending, you can make sure you highlight what will be most
development, and networking through our conference. beneficial to you.
Don't forget about your existing relationships. Yes, the
Online registration doesn't open until Tuesday, Jan. 4, 2022, but conference is a great time to make new contacts, but it also is
with a little prepping now, you'll be on your way to gaining the the optimum time to visit with those you already know and
most out of your attendance. respect. Make a list of people you want to reconnect with or
maybe hoope to get to know more after having met them
Before the Conference during a previous TEXPERS conference or event. These could be
peers, friends, clients or vendors. Reach out to them weeks
Request time off. It may be several months out, but now is the before the event to make sure they will be there for TEXPERS'
time to start getting your boss ready to grant you time off to 2022 Annual Conference and, if so, set up a time to meet.
attend. Write a letter requesting time off to attend TEXPERS' TEXPERS staff usually plan breaks and receptions offering
Annual Conference. The letter should state the reason for the plenty of time built into the conference to give you the chance
request and describe the training and educational programing to meet up.
available and how it will help you as a fund's board member or
employee. Mention that you are available to discuss the Keep up with the latest developments regarding TEXPERS' 2022
conference in detail with your boss at their convenience. And Annual Conference on the association's website at
let your employer know you will need to respond within a www.texpers.org.
specific time frame to ensure you qualify for a special room
@aAtllaTelElneXnJPjooEnnReeSss.1iHs9ed7ji4oreioncentdoLritnohkfeecadosInms.omcuiantiicoantiionn2s0a1n7d. eCvoennntescmt waritkhethiinmg
TEXPERS PENSION OBSERVER
www.texpers.org | 21



BUILD A BRIGHTER FUTURE
FOR YOUR FAMILY

Rastegar Property Company is a

private, technology-enabled real

estate investment firm focused on

development in all asset classes

throughout Austin and the Sun Belt.

Before

With experience in 13.8 million square
After
feet of real estate across 13 states and

38 cities, the vertically integrated firm

specializes in acquiring complex assets


with opportunities to create value

through repositioning, redevelopment,

and improved operational efficiencies.

IS A PROUD SPONSOR OF THE TEXAS ASSOCIATION
OF PUBLIC EMPLOYEE RETIREMENT SYSTEMS.

Scott Olguin Mychael Perry
Managing Director of Director of Institutional
Institutional Relations

[email protected] Relations

[email protected]
(512) 470-6007
(909) 436-9135