Last fall, with little fanfare, the Texas Teachers Retirement System, or TRS, set up an office in London. That means that Britain’s recent vote to leave the European Union could be felt a little closer to home for the state’s 1.4 million public education employees and retirees.
The hope was to be where the action is, so that the $130 billion pension fund could be “in the room” for the best opportunities in Europe’s private equity and other markets. Harold Evensky is chairman of wealth management firm Evensky and Katz in Lubbock.
“As the economy becomes much more global and the competition gets much stiffer, it’s credible to me that having a small presence there makes sense,” he said.
Disclaimer: Evensky’s also a professor at Texas Tech University. He’s a participant in TRS, as is the staff at KUT.
The pension fund wanted to be near the action, and it got it. It opened just in time for one of the biggest economic decisions – perhaps the biggest upheaval – to hit the continent in decades, Britain’s vote to leave the EU.
“London has been, really the heart of UK and European financial markets. I don’t know if in a couple of years that’s going to be the case, but certainly it is right now,” Evensky said.
London is the financial center of the European Union for several reasons, among them free movement of employees. That served two purposes: It allowed London-based firms to choose from the best candidates across the continent and gave them unfettered access to countries to do deals; it also made it a place for pensions, sovereign wealth funds and international companies to locate for investments.
What’s next? No one really has answers, but the sense is that there is time to figure that out.
“It will be a while, years, if there is any significant transition in terms of where is the primary home for European financial markets,” Evensky said.
For the dozens of Texas companies that have opened UK offices, it could mean opening more shops within the EU, as Patrick Jankowski, an economist at the Greater Houston Partnership, told Houston Public Media last week.
“It’s as simple as if you have an office in London and you’re using your office in London to serve the Continent, now you probably need an office in London and an office in Bonn, or an office in Paris or Berlin or somewhere,” Jankowski said.
The same could be said for TRS.
As for market concerns after the British referendum, Evensky said it’s “just simply going to be a small blip in a long-term, bumpy-but-rising international equity market.”