This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0971.GOS
DATE: 2/1/2022
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 971 State Board of Administration Alternative Investments
SPONSOR(S): LaMarca
TIED BILLS: IDEN./SIM. BILLS: SB 1314
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Government Operations Subcommittee Villa Toliver
2) Appropriations Committee
3) State Affairs Committee
SUMMARY ANALYSIS
The SBA has responsibility for managing investments for the Florida Retirement System (FRS) pension plan
and the FRS investment plan, which represents approximately $221.8 billion, or 80 percent, of the $259.9
billion in assets managed by the SBA. The SBA’s ability to invest the FRS assets is governed by a “legal list” of
the types of investments and the total percentage of funds that may be invested in each type. Currently, the
SBA may invest up to 20 percent of any of its funds in alternative investments. An alternative investment is
investment in a private equity fund, venture fund, hedge fund, or distress fund or a direct investment in a
portfolio company through an investment manager.
The bill authorizes the SBA to invest up to 30 percent of any of its funds in alternative investments, which is an
increase from the current maximum of 20 percent.
The bill does not appear to have a fiscal impact on state government or local governments.
STORAGE NAME: h0971.GOS PAGE: 2
DATE: 2/1/2022
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
State Board of Administration
The State Board of Administration (SBA) is established by Article IV, s. 4(e) of the Florida Constitution,
and is composed of the Governor as Chair, the Chief Financial Officer, and the Attorney General. The
SBA members are commonly referred to as “Trustees.” The SBA derives its powers to oversee state
funds from Art. XII, s. 9 of the Florida Constitution.
The SBA has responsibility for managing investments for the Florida Retirement System (FRS) pension
plan and for administering the FRS investment plan, which represent approximately $221.8 billion (80
percent) of the $259.9 billion in assets managed by the SBA, as of January 4, 2022.
1
The SBA also
manages approximately 30 other investment portfolios, with combined assets of $30 billion, including
the Florida Hurricane Catastrophe Fund, the Florida Lottery Fund, the Florida Pre-Paid College Plan,
and various debt-service accounts for state bond issues.
2
SBA Investments
Investment decisions for the pension plan are made by fiduciaries hired by the state. Under Florida law,
an SBA fiduciary charged with an investment decision must act as a prudent expert would under similar
circumstances, taking into account all relevant substantive factors. A nine-member Investment Advisory
Council provides recommendations on investment policy, strategy, and procedures.
3
The SBA’s ability to invest the FRS assets is governed by s. 215.47, F.S., which provides for a “legal
list” of the types of investments and the total percentage that may be invested in each type. Some
“legal list” guidelines specific to the pension plan provide:
No more than 80 percent of assets should be invested in domestic common stocks.
No more than 75 percent of the assets should be invested in internally managed common
stocks.
No more than three percent of equity assets should be invested in the equity securities of any
one corporation, except to the extent a higher percentage of the same issue is included in a
nationally recognized market index, based on market values, or except upon a specific finding
by the board that such higher percentage is in the best interest of the fund.
No more than 25 percent of assets should be invested in notes secured by FHA-insured or VA-
guaranteed first mortgages on Florida real property, or foreign government general obligations.
No more than 50 percent of assets should be invested in foreign corporate or commercial
securities or obligations.
No more than 20 percent of assets should be invested in alternative investments.
Alternative Investments
As noted above, the “legal list” guidelines include the authorization to invest no more than 20 percent of
assets in alternative investments
4
through participation in alternative investment vehicles,
5
or other non-
publicly traded investments.
6
The cap on alternative investments was last changed in 2012, when it
1
SBA Agency Bill Analysis for HB 971, on file with the Government Operations Subcommittee.
2
State Board of Administration, Annual Investment Report July 1, 2020 – June 30, 2021, available at:
https://www.sbafla.com/fsb/Portals/FSB/Content/Performance/Annual/2020-2021_AIR.pdf?ver=2021-12-03-085005-077 (last visited
January 24, 2022).
3
Section 215.444(1), F.S.
4
“Alternative investment” means an investment by the State Board of Administration in a private equity fund, venture fund, hedge
fund, or distress fund or a direct investment in a portfolio company through an investment manager. Section 215.4401(3)(a)1., F.S.
5
“Alternative investment vehicle” means the limited partnership, limited liability company, or similar legal structure or investment
manager through which the State Board of Administration invests in a portfolio company. Section 215.4401(3)(a)2., F.S.
6
Section 215.47(15), F.S. STORAGE NAME: h0971.GOS PAGE: 3
DATE: 2/1/2022
was raised from 10 percent to 20 percent.
7
Currently, the SBA has approximately 18 percent of its
funds invested in alternative investments.
8
Effect of the Bill
The bill authorizes the SBA to invest up to 30 percent of any of its funds in alternative investments,
which is an increase from the current maximum of 20 percent.
B. SECTION DIRECTORY:
Section 1 amends s. 215.47, F.S., relating to investments.
Section 2 provides an effective date of July 1, 2022.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
None.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not applicable. This bill does not appear to affect county or municipal governments.
2. Other:
None.
B. RULE-MAKING AUTHORITY:
This bill does not confer rulemaking authority nor require rulemaking.
7
Chapter 2012-112, L.O.F.
8
SBA Agency Analysis, supra note 1. STORAGE NAME: h0971.GOS PAGE: 4
DATE: 2/1/2022
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES
Not applicable.