Prediction Open · timeframe Dec 2029
India, not the US, will be the dominant market in the 2020s
“And I don't think the U S is going to be the dominant market in this decade. At this point, it's probably going to be India.”
Disclosure
Texas Teachers maintains a unique zero percent allocation to credit
“And then we also have, which is pretty interesting, we have zero allocation to credit, which is a little bit unique. Most public pensions have some allocation of credit. We don't have any.”
Disclosure
Texas Teachers excludes venture capital from its emerging manager program
“We don't allocate to venture capital in our emerging manager program. And there are a lot of emerging managers in venture capital. But we've not had success there.”
Disclosure
Texas Teachers instituted proxy policy to systematically vote against activist shareholders
“Several years ago we went to our proxy provider and we said, We're going to need you to come up with a new benchmark policy for us that takes out these more activist types issues, and we suggested they call it the strict fiduciary policy, and they actually end…”
Prediction Not checkable as stated
AI will accelerate market efficiency, making alpha harder to generate
“Alpha is going to get harder and harder and harder. It already has gotten harder. AI is going to actually speed up that as well. And so as investors thinking about beta is going to become more and more important over time and having the best beta you possibly …”
Disclosure
Texas Teachers maintains a unique 6% dedicated energy portfolio allocation
“For us, it's a real advantage as other types of investors globally are prohibiting or withdrawing from investing in energy. I mean, we're very much open for business and we see it as a crucial opportunity for us. So we've leaned into that. We have that six per…”
Disclosure
Auby: Texas Teachers only backs solar and wind on strict return basis
“We don't necessarily see it as our role to invest in that solar and wind. We will, but we'll only do it on a straight return, you know, maximized return, strict fiduciary basis. We'll do it if it's a good investment, but We find that others want to invest in t…”
Disclosure
Texas Teachers rejects climate lens in favor of strict fiduciary risk-return
“We are very much in that strict fiduciary mindset where we're not thinking about the climate lens in particular on the portfolio as a lens separate and distinct from just thinking about risk and return on a portfolio.”
Insight
Data center investing is fundamentally about access to power, not land
“Usually when you're investing in farmland, you're not actually buying the land. What you're really buying is access to water. It's more about water than it is soil. And so data centers is the same thing. It's about access to power.”
Insight
Playing naive effectively deters unethical propositions at work, Auby advises
“Naivete is a great tool in an ethically challenged situation. So if someone's coming to you with something that's maybe ethically challenging, and if you ask why a lot, and you're like, well, why does this make sense? And why is this helpful? People just go aw…”
Assertion Not checkable as stated
Python has largely replaced Excel in institutional finance, says Auby
“Python has certainly taken over everything that we do on the finance side, even at Texas teachers. I mean, kids show up and it's not necessarily just Excel anymore. It's Python programming.”
Assertion Not checkable as stated
Public pensions and endowments are among the only unlevered capital pools
“It's a pension fund is not levered. So it's one of the only pools of capital on the planet that doesn't actually have balance sheet leverage. So you're talking about a public pension funds, endowments, and sovereign wealth funds. These are the unlevered pools …”
Insight
Auby: Pension risk management is about efficient deployment, not existential survival
“What it shifts from is not so much catastrophic risk, not so much existential risk, Run on the bank type risks. It turns into more, how do you most efficiently use risk, most efficiently deploy it?”
Disclosure
Auby: Texas Teachers applies 4% leverage for 104% asset exposure
“Eight percent is risk parity. And finally, we are levered about four percent. So we are up to a 104% of assets versus a hundred percent of NAV value.”
Insight
Private market valuation lags make portfolios look artificially diversified
“There's one type of smoothing in that evaluations don't occur as regularly as you do in the public market. The other thing that occurs is everything's lagged as well. So both of those things are going to show you to be more diversified than you actually are.”
Assertion Partly supported
Auby: Texas leads the nation in oil, gas, solar, wind, and batteries
“Texas is number one in pretty much every form of energy you can name. So number one in oil, number one in gas, number one in solar, number one in wind, number one in batteries. I just read the other day.”
Disclosure
Auby: TRS holds 49% of its portfolio in alternative assets
“So we have 11% of our portfolio in hedge funds, and that's in addition, by the way, to that 38% of private, so total alternatives is 49%, which again is quite high for a public pension, but quite low versus the endowment community.”
Insight
Auby: Bifurcating zero-beta and directional strategies is fairest hedge fund benchmark
“And so we measure that stable value hedge fund portfolio versus a cash-like benchmark plus a spread. Then we measure that directional portfolio versus a full beta long only equity benchmark. And so we overlay that portfolio with derivatives in order to achieve…”
Insight
Auby: Public pensions are among the world's most liquid capital pools
“Public pension funds are some of the most liquid pools of capital in the world, and there's a lot of implications for that. You have liquidity at the times you need it. You can go in liquid when illiquidity is being rewarded.”
Insight
Venture capital capacity limits restrict large public pension allocations
“So venture capital, for example, can be difficult for us to ask because the gating item for venture capital is oftentimes not capital. We have lots and lots of capital, but if someone has a five hundred million dollar fund and we say we want two hundred millio…”
Insight
Auby: Institutional peers pass on great investments due to rigid asset-class silos
“Sometimes the most attractive, interesting investments are the ones that most of your peers said no to because they all said, well, is this a private equity deal or is this a credit deal or is this a real estate deal or is this an infrastructure deal? We don't…”
Insight
Auby: Remote work enables Austin talent to leave TRS for New York firms
“Working from home has hurt us a little bit, actually, because people can now, for example, work from home for an employer in New York City, and then move to Austin. And so they don't need to necessarily change employers. And folks can leave us And join a firm …”
Disclosure
Auby: TRS decentralized investment committees into separate asset class verticals
“One thing we did was to make sure that we had one internal investment committee that approved all investments for the entire fund. And now we've put investment committees into each vertical. So now there's a private equity investment committee, a real estate i…”
Insight
Auby: Investment committees function best with five to six members
“So the size of a committee is very important. You want it large enough that you get a very diverse set of viewpoints, but you don't want it too large because then there can be a real free rider problem actually when you have a committee that's too large and yo…”
