# ATRS Statement of Investment Policy (Board Policy 4) Board Policy 4 is the central document governing how ATRS makes investment decisions. The version produced in the 6/18/25 FOIA reflects the policy as last amended on 6/2/2025. The 7/3/25 supplemental FOIA production closed the prior gap as to which provisions changed in the 6/2/2025 amendment: the amendment is confined to Section T (Proxies) and is the proxy voting framework change paired with Resolution 2025-21 (Egan-Jones Proxy Services). No other section of BP4 was changed in the 6/2/2025 amendment. The policy text governing the procedural and substantive treatment of Resolution 2025-22 (the Israel Bonds authorization) is therefore the same text in both the pre-amendment and post-amendment versions of every section other than Section T. ## Structural overview The policy is organized into twenty-one numbered sections (A through U). Section A states the policy and its purposes, including the central administrative requirement that "No investment shall be made without an investment consultant's written advice or written recommendation" and the requirement that material direct investment changes also require Investment Committee and Board written approval. Section B governs divestment from financial services providers on the State Treasurer's anti-BDS list under Ark. Code § 25-1-1002. Section C addresses Act 937 of 2025 prohibitions on investment in PRC-owned entities and entities subject to U.S. Treasury restrictions. Section D states the standard of care including the pecuniary fiduciary requirement under Ark. Code § 24-2-801 et seq. Section E sets the asset allocation targets and ranges. Section F governs rebalancing. Sections G through O describe the asset categories: investment manager selection, total equity, fixed income, opportunistic and alternatives, real assets, private equity, cash equivalents, Arkansas-related investments, commingled and mutual funds, derivatives. Section P covers securities lending. Section Q sets reinvestment guidelines for cash collateral. Section R addresses investment manager reporting. Section S defines the joint executive director and investment consultant role for manager selection and monitoring. Section T contains the proxy voting framework, with multiple references to Ark. Code § 24-2-805(b)(2) and the requirement that any vote, instruction, or recommendation be consistent with the obligation to act based only on pecuniary factors. Section U addresses soft dollars. ## Asset allocation targets The targets and ranges established in Section E: | Asset Category | Minimum | Target | Maximum | |---|---|---|---| | Total Equity | 43.0% | 48.0% | 53.0% | | Fixed Income | 17.0% | 20.0% | 23.0% | | Opportunistic/Alternatives | N/A | 5.0% | N/A | | Real Assets | N/A | 15.0% | N/A | | Private Equity | N/A | 12.0% | N/A | | Cash Equivalents | 0.0% | 0.0% | 5.0% | The note accompanying the table reads: "Due to the illiquid nature of opportunistic/alternatives, real assets, and private equity, it is not prudent to set rebalancing ranges for these asset classes." The asset allocation places Israel Bonds within the Fixed Income category (target 20 percent of total assets, range 17 to 23 percent). At an approximately $22.4 billion total portfolio (per Rod Graves's 5/15/2025 figure), the Fixed Income target translates to approximately $4.48 billion. The new $50 million Israel Bonds mandate is approximately 1.1 percent of the Fixed Income target, or approximately 0.22 percent of the total portfolio. ## The pecuniary standard Section D.3 reads: "Each party serving in a fiduciary capacity for the trust shall discharge his or her duties solely in the pecuniary interest of the participants and beneficiaries and in compliance with Arkansas Code § 24-2-801 et seq. A fiduciary's evaluation of an investment, or evaluation or exercise of any right appurtenant to an investment, shall take into account only pecuniary factors." This is the policy enshrinement of the Arkansas Act 498 of 2023 pecuniary standard. Mark White's 5/22/2025 Board preview language ("From a pecuniary standpoint, it appears to me these bonds are a worthy investment") matches the policy's own framing. The companion concept page [[pecuniary-frame-act-498]] addresses the meaning and application of this language in the Israel Bonds context. ## Joint manager selection responsibility Section S reads: "The Executive Director and investment consultant are jointly responsible for the initial selection of investment managers and any increase or decrease in an investment manager's funding. The Executive Director and investment consultant are jointly responsible for monitoring existing investment managers on performance, stability, and compliance." This makes the Aon partner PJ Kelly and ATRS executive director Mark White jointly responsible for the selection of Reams Asset Management as the Israel bond manager. Kelly's documented disclosure that Reams was "light on experience with Israel bonds" sits inside this joint-responsibility framework. The companion concept page [[independent-credit-analysis-gap]] addresses the implications. ## Proxy voting framework Section T contains five paragraphs of detailed proxy voting requirements. The recurring requirement is that any vote, instruction, or recommendation made by the Executive Director, a proxy vote management service, or an investment manager pursuant to a delegation must be "consistent with the fiduciary obligation to act based only upon pecuniary factors" with a written commitment to that effect under Ark. Code § 24-2-805(b)(2). The Mark White 5/22/2025 Board preview email recommends the Egan-Jones Proxy Services contract at $20,000 annually as the implementation of this requirement: "I am recommending that you approve the Policy changes and accept the proposal from Egan-Jones Proxy Services... Egan-Jones will handle our proxies for us based on a policy that aligns with what Arkansas state law requires." ## Divestment and country-of-concern provisions Section B requires divestment from any financial services provider on the State Treasurer's list under Ark. Code § 25-1-1002 within 365 days of inclusion, with an exception for locked-in maturities where early divestment would cause financial penalty. Section C, added pursuant to Act 937 of 2025, prohibits direct holdings in entities owned in whole or majority by the People's Republic of China government or in entities subject to U.S. Treasury investment restrictions because they are in countries of concern. The Section C provisions create a categorical prohibition only for those two categories. They do not create a categorical permission for investment in any other foreign sovereign debt; the standard of care provisions in Section D continue to apply. ## The June 2, 2025 amendment The 7/3/25 supplemental ATRS FOIA production closed the gap as to which provisions changed in the 6/2/2025 amendment. The 6/2 Board packet contains both the pre-amendment version of BP4 (packet pages 474-487) and the post-amendment version (packet pages 488-501) side by side. A direct diff returns the following four substantive changes: Subsection 3 of Section T is replaced. The deleted text authorized the investment manager to vote all proxies on the System's behalf. The replacement text authorizes the Executive Director to vote all proxies and to provide binding voting instructions to investment managers. Subsection 4 of Section T is new. It authorizes the Executive Director to retain an independent proxy vote management service. Subsection 5 of Section T is new. It authorizes the Executive Director to delegate voting authority to an investment manager (as the residual permissive option). The pecuniary requirement under Ark. Code § 24-2-805(b)(2) is reiterated at all three operating modes (Executive Director directly, proxy service, delegated manager) with the requirement of a written commitment to act based only upon pecuniary factors. No other section of BP4 changed. The asset allocation table in Section E, the joint manager selection responsibility in Section S, the pecuniary fiduciary standard in Section D.3, the written-recommendation requirement in Section A.5, the divestment provisions in Section B, the country-of-concern provisions in Section C, and the soft-dollar provisions in Section U were all carried forward unchanged. The amendment is structurally paired with Resolution 2025-21, which hires Egan-Jones Proxy Services to provide proxy vote management and advisory services. The Section T amendment authorizes hiring an independent proxy service; Resolution 2025-21 names Egan-Jones as that service. The Executive Summary in the 6/2 packet describes the relationship: "This recommendation is contingent on Board approval of updates to Board Policy 4." The two items were designed to be adopted together. The companion concept page [[bp4-amended-same-day-as-vote]] documents the closed amendment-text question in detail. See also [[egan-jones-proxy-services]] for the proxy service provider. The 12/2/2024 amendment (the one preceding the 6/2/2025 amendment) is not in this production. Section C (the Act 937 of 2025 countries-of-concern provision) was carried forward through the 12/2/2024 to 6/2/2025 amendments unchanged; the 12/2/2024 amendment is most plausibly the one that added Section C in anticipation of Act 937's enactment. ## What is policy required and what is not Where the policy says "shall," the action is mandatory. Section A.5: "shall not approve any material changes in any direct investment without first receiving written advice or a written recommendation from a third-party investment consultant." Section D.3: a fiduciary's evaluation "shall take into account only pecuniary factors." Section T.1: shares "shall be voted on solely in the pecuniary interest of the System's plan beneficiaries." Where the policy says "may," the action is permissive. Section A.4: "one or more investment consultants may be retained by the Board as investment advisors." Section M.1: "The System may initiate Arkansas-related mortgage loans, promissory notes, direct real estate investments." Section O.1: "Derivatives may be used to reduce the risk in a portfolio." The Israel Bonds mandate sits at the intersection of Section A.5 (a mandatory requirement) and Section S (a permissive structure for joint manager selection). Whether the policy was satisfied in the 6/2/2025 action depends on whether Aon provided written advice or a written recommendation that the Investment Committee and Board could rely on. The materials in this batch do not establish whether such written advice was produced. ## Evidence > "No investment shall be made without an investment consultant's written advice or written recommendation. The System shall not approve any material changes in any direct investment without first receiving written advice or a written recommendation from a third-party investment consultant and, if needed, outside legal counsel, and, without thereafter receiving written approval by the Investment Committee and Board." > BoardPolicy_04.pdf p.1-2, Section A.5 > "Each party serving in a fiduciary capacity for the trust shall discharge his or her duties solely in the pecuniary interest of the participants and beneficiaries and in compliance with Arkansas Code § 24-2-801 et seq. A fiduciary's evaluation of an investment, or evaluation or exercise of any right appurtenant to an investment, shall take into account only pecuniary factors." > BoardPolicy_04.pdf p.3, Section D.3 > "The Executive Director and investment consultant are jointly responsible for the initial selection of investment managers and any increase or decrease in an investment manager's funding." > BoardPolicy_04.pdf p.11-12, Section S.1 > "Asset Category | Minimum | Target | Maximum / Total Equity | 43.0% | 48.0% | 53.0% / Fixed Income | 17.0% | 20.0% | 23.0%" > BoardPolicy_04.pdf p.4, Section E.1 > "Amended December 7, 2020 / Amended June 7, 2021 / Amended September 25, 2023 / Amended February 5, 2024 / Amended December 2, 2024 / Amended June 2, 2025" > BoardPolicy_04.pdf p.13-14, History ## Cross-References [[written-recommendation-requirement]] concept page on Section A.5 [[pecuniary-frame-act-498]] companion concept page on Section D.3 and the Act 498 framing [[atrs-board-rules-r1]] [[atrs-bot-packets-7-3-25]] source pages [[independent-credit-analysis-gap]] [[atrs-resolution-2025-22]] [[atrs-pre-existing-indirect-exposure]] [[bp4-amended-same-day-as-vote]] companion concept pages [[egan-jones-proxy-services]] proxy service provider hired under the 6/2 amendment [[mark-white]] [[pj-kelly]] [[katie-comstock]] [[reams-asset-management]] entities operating under this policy