By Terry Flanagan

Slow and Steady

06.05.2013 By Terry Flanagan

Michael Brakebill is fine letting other public-pension chief investment officers blaze trails in search of better risk-adjusted return — and take on the attendant risk that it won’t work out.

“We are undeniably a laggard on innovation,” said Brakebill, CIO of Tennessee Consolidated Retirement System. “We try to take the good ideas other people have done and vetted over a long period of time, and implement them in what we do.”

Michael Brakebill, TCRS CIO

Michael Brakebill, TCRS CIO

Established in 1972 via the rollup of seven separate retirement systems, TCRS manages about $38 billion for 210,500 active employees and 122,500 retirees, spanning state workers, public-school teachers, and political staffers. In a December 2012 letter to members, Tennessee State Treasurer David Lallard described TCRS’s investment program as risk-averse and designed to preserve capital in difficult environments.

That means mostly watching as some other state pensions try to goose returns by restructuring alternative investments such as hedge funds and private equity, trading more derivatives, or investing in lower-rated bonds.

“We manage a conservative portfolio,” Brakebill told Markets Media in a May 8 interview from his office in downtown Nashville, located a half mile from the Country Music Hall of Fame. “We have significantly less equity risk overall than peers — our lower-risk posture is a key hallmark of the fund.”

As of December 31, 2012, TCRS’s investment portfolio consisted of 41.7% North American equity, 28.8% U.S. bonds, 15.4% international equity, 7.2% inflation-indexed bonds, 4.7% real estate, 0.8% international bonds, and 0.6% private equity…


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