Amid the turmoil surrounding Britain’s exit from the European Union, some board members of the Teacher Retirement System of Texas wondered if maintaining the pension plan’s London investment office was wise.
But Jerry Albright, the chief investment officer of the $154.3 billion fund, assured them at the board’s April 25 meeting that the prospects of the UK-based operation were good, regardless of the situation with Brexit. So the office is staying put.
“We continue to see great results from our London office,” he said, adding that the pension plan wants to do some hiring and move to another location—in London. For one thing, it can take advantage of cheaper leases. “A lot of the market has gone down in London because of Brexit,” he said.
The first lease was originally a short-term shared office, whose rent Albright said had “quite a high markup.” Albright said Texas Teachers can find other quarters at 40% less.
“We’re not looking for a bigger space, we’re looking for a similar space,” he said. “We feel like we can beat the value that we’re getting.”
Prime Minister Theresa May’s difficulty striking a deal with the EU on Britain’s departure has prompted a number of financial institutions to shift their venue from London, historically Europe’s primary money center, to the Continent.
Albright noted that “a lot of these big bank systems are moving to Frankfurt,” in Germany. But those are mainly for back-office operations, not the investment professionals. “All the investors are still sitting there in London,” he said. “As far as if it’s the best place to be, I think it’s going to be the center of that financial world for a long period of time.”
London retains some advantages that other cities in Europe lack, he argued. The English-speaking staff would have language barriers in Spain or Germany, and that there is “no city big enough to take them,” he said.
Whether that continues to be the case is hard to say, he indicated. “There’s impediments to a massive shift that may take place over time, but nothing in the near-term,” he said. “If there’s a no-deal Brexit tomorrow, I think the markets will react but I don’t think people would be shuffling.”
London should remain a decent place to know what’s going on in the EU, he said.
“Now, it is important to be there with boots on the ground to try to understand how this is going to occur and what’s going to happen,” he said. The Texas funds’ London officials have contacts who “are connected and they can give you some indication of where things are going and what to look for.”
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Tags: Brexit, Jerry Albright, Pension, Texas Teacher Retirement System (TRS)