Georgia Closer To Dropping Ban On Alternatives

Georgia’s public pensions, long prohibited by law from investing in alternative investments like private equity, may now be closer to allowing such investments after the state Senate voted 50-to-4 to change the rules. The bill nevertheless excludes any allocation changes to the state’s biggest pension fund, the $48 billion Georgia Teachers’ Retirement System.

The state of Georgia is one of the last holdouts in prohibiting public pensions from investing in alternatives.

Many of the nation’s recession-battered pensions have lately sought to invest in alternatives, or increase these investments, in the hope they will produce better returns and lessen the strain of growing pension distributions on cash-strapped states.

If the bill passes the state’s House chamber and is signed by Gov. Nathan Deal, the $14 billion Georgia Employees’ Retirement System and most other state pensions will be allowed to invest as much as 5 percent of their assets in private equity, venture and other alternatives. Under the bill’s provisions, new investments would be limited to 1 percent a year until the overall cap is reached.

Similar legislation to eliminate the pensions’ ban on alternative investments passed the state Senate prior to the economic crisis, but they failed to pass the House. Final passage is now seen as more likely.