This section requires retirement-related systems and fiduciaries to follow the prudent-man rule, diversify investments, limit equities exposure, and file quarterly reports.
§263. Prudent-man rule; investments; reporting A. The prudent-man rule shall be applied by the systems, funds, and plans governed by this Subpart. B. The prudent-man rule shall require each fiduciary of a retirement system and each board of trustees acting collectively on behalf of each system to act with the care, skill, prudence, and diligence under the circumstances prevailing that a prudent institutional investor acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. C. This standard requires the exercise of reasonable care, skill, and caution, and is to be applied to investments not in isolation, but in the context of the trust portfolio, and as part of an overall investment strategy, which shall include an asset allocation study and plan for implementation thereof, incorporating risk and return objectives reasonably suitable to that trust. The asset allocation study and implementation plan shall include the examination of market value risk, credit risk, interest rate risk, inflation risk, counterparty risk, and concentration risk. The investment policy of each system, plan, or fund shall preserve and enhance principal over the long term and provide adequate liquidity and cash flow for the payment of benefits. The investments shall be diversified to minimize the risk of significant losses unless it is clearly prudent not to do so. D.(1) Notwithstanding the prudent-man rule, no governing authority of any system or fund governed by this Subpart shall invest more than fifty-five percent of the total portfolio in equities, except as provided in Paragraph (2) of this Subsection. (2) The governing authority of any system may invest more than fifty-five percent of the total portfolio in equities, so long as not more than sixty-five percent of the total portfolio is invested in equities and at least ten percent of the total equity portfolio is invested in one or more index funds which seek to replicate the performance of the chosen index or indices. (3) When contemplating any investment, action, or asset allocation the following factors shall be given weight: (a) The availability of public pricing to value each investment. (b) The ability to liquidate each investment at a fair market price within a reasonable time frame for the size of investment that is being considered. (c) The degree of transparency that accompanies each investment. (d) The risk of fluctuations in currency that may accompany each investment. (e) The experience of the professionals who will manage each investment and the financial soundness of the business entity employing such professionals. (f) The degree of diversification which exists within each investment and that such investment itself may provide relative to the other existing investments in the system's portfolio. (g) Whether leverage is involved. (h) The potential for unrelated business taxable income as defined in Section 512 of the Internal Revenue Code. (i) The jurisdiction of the laws that govern each investment. (j) The net return that is expected relative to the risk that is associated with each investment. E. Repealed by Acts 2010, No. 1004, §2, eff. July 1, 2010. F. Notwithstanding the prudent-man rule, a system board of trustees may but is not required to divest itself of any holding in a company having facilities or employees or both located in a prohibited nation as that term is defined in R.S. 11:312(B)(2). G.(1) Each system, plan, or fund governed by this Subpart shall submit to the House and Senate committees on retirement and to each other state and statewide retirement system electronically transmitted quarterly reports beginning with the quarter ending June 30, 2010, which shall be submitted no later than thirty calendar days after the end of the quarter. (2) Each report submitted pursuant to this Subsection shall contain, at a minimum, the following: (a) The investment return net of investment fees and expenses expressed as a percentage return and dollar amount. (b) The amount of administrative expenses. (c) The board-approved target asset allocation. (d) The current actual asset allocation of the system portfolio. (3) Investment returns reported pursuant to this Subsection shall be by total fund and particular asset class over the quarter reported, fiscal year-to-date, one year, three year, five year, and ten year periods. Acts 1984, No. 867, §1; Acts 1987, No. 49, §1; Acts 1989, No. 216, §1; Acts 1990, No. 214, §1; Redesignated from R.S. 42:717 by Acts 1991, No. 74, §3, eff. June 25, 1991; Acts 1992, No. 1046, §§1 and 2, eff. July 1, 1993; Acts 1997, No. 1301, §1, eff. June 30, 1997; Acts 2003, No. 788, §1, eff. July 1, 2003; Acts 2004, No. 850, §1, eff. July 12, 2004; Acts 2005, No. 9, §1, eff. May 27, 2005; Acts 2010, No. 1004, §§1, 2, eff. July 1, 2010. NOTE: See Acts 2004, No. 850, §3, relative to phasing in of indexing and relative to deadline for compliance by La. Assessors' Retirement Fund.