The Florida State Board of Administration Audit Committee convened this week to review the investment performance of the Sunshine State and discuss upcoming changes that will have an impact on foreign investment from specific countries.
During the committee meeting, Chris Spencer, the executive director of the SBA, shared his analysis of the state budget as assigned by Governor Ron DeSantis. Spencer highlighted a significant year-over-year increase of 9.3%. He attributed this growth to the state’s successful recruitment and retention initiatives, along with a strong emphasis on IT improvements in Florida.
During the 2024 legislative session, lawmakers approved House Bill 7071. This bill imposes restrictions on the investments that the SBA can make on behalf of the Florida Retirement System. The aim is to limit investments in companies that are owned by the Chinese government.
The bill states that the SBA is not allowed to invest any more funds in these Chinese companies. Additionally, the SBA is required to disclose and sell off any existing investments in these companies by September 1, 2025.
According to the bill’s summary, preliminary data from November 2023 revealed holdings worth around $277.1 million in 211 Chinese companies.
In his analysis, Spencer had two primary goals. First, he was responsible for ensuring the successful implementation of the bill. Second, he kept the state board informed about the current status of the bill. To his surprise, he discovered that the number of Chinese companies was significantly higher than initially estimated.
During the audit meeting on Monday, Spencer mentioned that they had successfully implemented the bill when the governor signed it into law in June. He stated that initially, they identified 547 publicly traded entities in China that met the criteria for divestment. They have now started reaching out to their fund managers to initiate the divestment process.
In 2023, Florida lawmakers passed a legislation known as HB5C. This law aims to broaden the scope of prohibited investments and “scrutinized companies” associated with Iran. The expanded criteria now include companies that have assets connected to Iran and are engaged in various sectors such as finance, manufacturing, petrochemicals, energy, mining, and shipbuilding.
According to Spencer, as of June 2023, the legislation has led to the inclusion of 13 companies on a continued examination list.
Spencer stated that the corporate governance team will closely monitor those companies for the rest of the year to assess if any additional action needs to be taken.
The Actuarial Assumptions Conference, scheduled for October, will see the SBA making recommendations. These recommendations will involve maintaining the current assumed rate of return and raising contributions to the Defined Benefit Plan.