Senate Bill text for SB0018

SENATE BILL 18

49th legislature - STATE OF NEW MEXICO - second session, 2010

INTRODUCED BY

Timothy M. Keller

FOR THE INVESTMENTS OVERSIGHT COMMITTEE

AN ACT

RELATING TO STATE INVESTMENTS; PROVIDING FOR THE STATE INVESTMENT COUNCIL TO APPOINT THE STATE INVESTMENT OFFICER AND TO APPOINT MEMBERS TO THE PRIVATE EQUITY INVESTMENT ADVISORY COMMITTEE; CHANGING MEMBERSHIP OF THE STATE INVESTMENT COUNCIL, THE PUBLIC EMPLOYEES RETIREMENT BOARD AND THE EDUCATIONAL RETIREMENT BOARD; PROVIDING FOR ADVISORY COMMITTEES TO THE STATE INVESTMENT COUNCIL, THE PUBLIC EMPLOYEES RETIREMENT BOARD AND THE EDUCATIONAL RETIREMENT BOARD; PROVIDING THE STATE INVESTMENT COUNCIL, THE PUBLIC EMPLOYEES RETIREMENT BOARD AND THE EDUCATIONAL RETIREMENT BOARD THE POWER TO HIRE CONTRACTORS, ADVISORS AND FUND MANAGERS; RECONCILING MULTIPLE AMENDMENTS TO THE SAME SECTION OF LAW IN LAWS 2005.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 6-8-2 NMSA 1978 (being Laws 1957, Chapter 179, Section 2, as amended) is amended to read:

"6-8-2. STATE INVESTMENT COUNCIL.--

A. There is created a "state investment council". The council shall be composed of:

[A.] (1) the governor;

[B.] (2) the state treasurer;

[C.] (3) the commissioner of public lands;

[D.] (4) the secretary;

[E. three public members appointed by the governor with the advice and consent of the senate;

F. the state investment officer; and

G.] (5) the chief financial officer of a

state institution of higher education appointed by the governor with the advice and consent of the senate;

(6) one public member appointed by the president pro tempore of the senate with the advice and consent of the senate;

(7) one public member appointed by the minority floor leader of the senate with the advice and consent of the senate;

(8) one public member appointed by the speaker of the house of representatives with the advice and consent of the senate;

(9) one public member appointed by the minority floor leader of the house of representatives with the advice and consent of the senate; and

(10) three public members appointed by the majority of the other nine members, with the advice and consent of the senate.

B. The [chairman] chair of the council shall be the governor.

C. All actions of the council shall be by majority vote, and at least [three] five members appointed pursuant to [Subsections E and G] Paragraphs (6) through (10) of Subsection A of this section must be present to constitute a quorum.

D. Members of the council appointed pursuant to Paragraphs (6) through (10) of Subsection [E] A of this section shall be reimbursed per diem and mileage pursuant to the provisions of the Per Diem and Mileage Act."

Section 2. Section 6-8-3 NMSA 1978 (being Laws 1957, Chapter 179, Section 3, as amended) is amended to read:

"6-8-3. COUNCIL TERMS AND QUALIFICATIONS.--

A. Members of the council appointed [by the governor] pursuant to Paragraphs (6) through (10) of Subsection A of Section 6-8-2 NMSA 1978, with the advice and consent of the senate, shall serve for staggered terms of five years. Members of the council shall serve until their successors are appointed and have qualified.

B. The members of the council appointed pursuant to Paragraphs (6) through (10) of Subsection [E] A of Section

6-8-2 NMSA 1978 shall be qualified by competence and no fewer than ten years' experience in the field of investment or finance. During tenure, a member of the council shall not be engaged in any capacity in the sale of securities to the state. Members of the council and officers and employees of the council shall be governed by the provisions of the [Conflict of Interest] Governmental Conduct Act. Nothing in this section or in the [Conflict of Interest] Governmental Conduct Act shall be construed as prohibiting an officer of a financial institution from participating as a member of the council in setting general policies of the council, nor shall any provision of the [Conflict of Interest] Governmental Conduct Act prohibit the council or the state treasurer from depositing funds under the jurisdiction of the council in any financial institution. A council member shall not hold an office or employment in a political party.

C. Any member of the council appointed pursuant to Paragraphs (6) through (10) of Subsection [E or G] A of Section 6-8-2 NMSA 1978 may be removed from the council by the governor, for cause, in the manner provided for removal of members of boards of regents under Article 12, Section 13 of the constitution of New Mexico. A vacancy in the membership of the council occurring other than by expiration of term shall be filled in the same manner as the original appointment but for the unexpired term only."

Section 3. Section 6-8-4 NMSA 1978 (being Laws 1957, Chapter 179, Section 4, as amended) is amended to read:

"6-8-4. INVESTMENT OFFICE--STATE INVESTMENT OFFICER--TERMS.--

A. There is established an "investment office". The chief administrative officer of the office shall be known as the "state investment officer".

B. The state investment officer shall be appointed by [the governor] a majority of the council with the advice and consent of the senate. [Recommendations as to his appointment shall be made to the governor by the investment council.] The state investment officer shall devote [his] the officer's entire time and attention to the duties of [his] that office and shall not engage in any other occupation or profession [nor shall he] or hold any other public office, appointive or elective. [He] The state investment officer shall be a person qualified, by training and investment experience, to direct the work of the investment [division and] office, shall have had at least five years' professional experience as an investment officer [He] and shall receive a salary to be determined by the state investment council but in no case less than fifty thousand dollars ($50,000) annually.

C. The state investment officer shall serve for an initial term of two years beginning July 1, 1981 and thereafter for terms of four years. The state investment officer may be removed from office by the [governor] council for cause in the manner provided for removal of members of boards of regents under Article 12, Section 13 of the constitution of New Mexico."

Section 4. Section 6-8-7 NMSA 1978 (being Laws 1957, Chapter 179, Section 7, as amended by Laws 2005, Chapter 194, Section 1 and by Laws 2005, Chapter 240, Section 1) is amended to read:

"6-8-7. POWERS AND DUTIES OF THE STATE INVESTMENT COUNCIL AND STATE INVESTMENT OFFICER--INVESTMENT POLICY--INVESTMENT MANAGERS.--

A. Subject to the limitations, conditions and restrictions contained in policy-making regulations or resolutions adopted by the council, [and subject to prior authorization by] the council [the state investment officer] may make purchases, sales, exchanges, investments and reinvestments of the assets of all funds [administered under the supervision of the council] in accordance with the Uniform Prudent Investor Act. The [state investment officer] council shall see that money invested is at all times handled in the best interests of the state.

B. The state investment officer shall formulate and recommend to the council for approval investment regulations or resolutions pertaining to the kind or nature of investments and limitations, conditions and restrictions upon the methods, practices or procedures for investment, reinvestment, purchase, sale or exchange transactions that should govern the activities of the investment office.

C. The council shall meet at least once each month, and as often as exigencies may demand, to consult with the state investment officer concerning the work of the investment office. The council shall have access to all files and records of the investment office and shall require the state investment officer to report on and provide information necessary to the performance of council functions. The council may hire one or more investment management firms to advise the council with respect to the council's overall investment plan for the investment of all funds managed by the investment office and pay reasonable compensation for such advisory services from the assets of the applicable funds, subject to budgeting and appropriation by the legislature. The terms of any such investment management services contract shall incorporate the statutory requirements for investment of funds under the council's jurisdiction.

D. All funds managed by the state investment officer shall be managed in accordance with the Uniform Prudent Investor Act. [With the approval of] The council [the state investment officer] may employ investment management services to invest the funds and may pay reasonable compensation for investment management services from the assets of the applicable funds, subject to budgeting and appropriation by the legislature.

E. For funds available for investment for more than one year, the [state investment officer] council may contract with any state agency to provide investment advisory or investment management services, separately or through a pooled investment fund, provided the state agency enters into a joint powers agreement with the council and that state agency pays at least the direct cost of such services. Notwithstanding any statutory provision governing state agency investments, the [state investment officer] council may invest funds available from a state agency pursuant to a joint powers agreement in any type of investment permitted for the land grant permanent funds under the prudent investor rule. In performing investment services for a state agency, the council and the state investment officer are exempt from the New Mexico Uniform Securities Act [of 1986]. As used in this subsection, "state agency" means any branch, agency, department, board, instrumentality, institution or political subdivision of the state, the New Mexico finance authority, the New Mexico mortgage finance authority and any tax-exempt private endowment entity whose sole beneficiary is a state agency.

F. The state investment officer shall provide quarterly performance reports to the legislative finance committee. Annually, the state investment officer shall ratify and provide written investment policies, including any amendments, to the legislative finance committee."

Section 5. Section 6-8-20 NMSA 1978 (being Laws 1987, Chapter 219, Section 3, as amended) is amended to read:

"6-8-20. PRIVATE EQUITY INVESTMENT ADVISORY COMMITTEE CREATED--MEMBERSHIP--DUTIES--TERMS--LIABILITIES--CONFLICT OF INTEREST.--

A. There is created the "private equity investment advisory committee" to the council. The committee consists of the state investment officer, a member of the council appointed by the [governor] council and three members who are qualified by competence and experience in finance and investment and knowledgeable about the private equity investment process and who are appointed by the [governor] council.

B. Members appointed by the [governor] council, except the council member, shall be appointed for three-year terms; provided that the terms of the initial committee members shall be staggered so that the term of one member expires each year. After the initial appointments, all [governor] appointed members shall be appointed for three-year terms. Members shall serve until their successors are appointed. A vacancy occurring other than by expiration of term shall be filled in the same manner as the original appointment, but only for the unexpired term.

C. The committee shall review and make recommendations to the council on investments authorized pursuant to Sections 7-27-5.15 and 7-27-5.26 NMSA 1978 and all other private equity investments and shall advise the council in matters and policies related to such investments. The committee shall establish policies for national private equity fund investments, New Mexico private equity fund investments and New Mexico film private equity fund investments not less often than annually and shall make copies available to interested parties.

D. Members of the committee shall receive per diem and mileage as provided for nonsalaried public officers in the Per Diem and Mileage Act and shall receive no other compensation, perquisite or allowance.

E. The committee shall elect annually a [chairman] chair from among its members and may elect other officers as necessary. The committee shall meet upon the call of the [chairman] chair or the state investment officer.

F. Members of the committee are public employees within the meaning of the Tort Claims Act and are entitled to all immunity and indemnification provided under that act.

G. A person shall not be a member of the committee if any recommendation, action or decision of the committee will or is likely to result in direct, measurable economic gain to that person or that person's employer.

[H. The state investment officer may enter into contracts with investment advisors for private equity fund investments and film fund investments authorized pursuant to Sections 7-27-5.15 and 7-27-5.26 NMSA 1978 and all other private equity investments and may pay budgeted expenses for the advisors from the assets of any fund administered under the supervision of the council, as applicable.

I.] H. As used in this section, "private equity investments" means any legal entity that has as its primary business activity the investment of funds in return for equity in or debt of businesses for the purpose of providing capital for startup, expansion, new product development, recapitalization or a similar business purpose."

Section 6. Section 10-11-130 NMSA 1978 (being Laws 1987, Chapter 253, Section 130, as amended) is amended to read:

"10-11-130. RETIREMENT BOARD--AUTHORITY--MEMBERSHIP.--

A. The "retirement board" is created and is the trustee of the association and the funds created by the state retirement system acts and has all the powers necessary or convenient to carry out and effectuate the purposes and provisions of the state retirement system acts, including, in addition to any specific powers provided for in the Public Employees Retirement Act but without limiting the generality of the foregoing, the power to:

(1) administer the state retirement system acts, including the management of the association and making effective the provisions of those acts, as well as to administer and manage any other employee benefit acts as provided by law;

(2) in addition to utilizing services of the attorney general and notwithstanding any other provision of law, employ or contract with and compensate competent legal counsel to handle the legal matters and litigation of the retirement board and the association and to give advice and counsel in regard to any matter connected with the duties of the retirement board;

(3) administer oaths;

(4) adopt and use a seal for authentication of records, processes and proceedings;

(5) create and maintain records relating to all members, affiliated public employers and all activities and duties required of the retirement board;

(6) issue subpoenas and compel the production of evidence and attendance of witnesses in connection with any hearings or proceedings of the retirement board;

(7) make and execute contracts;

(8) make purchases, sales, exchanges, investments and reinvestments of all funds and employ contractors, advisors or investment management services;

[(8)] (9) purchase, acquire or hold land adjacent to the state capitol grounds or other suitable location and build thereon a building to house the association and its employees and, in the event additional office space is available in the building after the retirement board and its employees have been housed, to rent or lease the additional space to any public agency or private person; provided that first priority for the rental or leasing shall be to public agencies and further provided that for the purpose of purchasing, acquiring or holding the land and the building thereon, the retirement board may use funds from the income fund and any other funds controlled by the retirement board the use of which for such purposes is not prohibited by law;

[(9)] (10) after the sale of the land and building acquired pursuant to Paragraph [(8)] (9) of this subsection, acquire land and build thereon a new building to house the association and its employees and hold the building and land in fee simple in the name of the association. In order to acquire the land and plan, design and construct the building, the retirement board may expend the proceeds of the sale of the land and building acquired pursuant to Paragraph [(8)] (9) of this subsection or any funds controlled by the board, the use of which for such purposes is not otherwise prohibited by law;

[(10)] (11) make and adopt such reasonable rules as may be necessary or convenient to carry out the duties of the retirement board and activities of the association, including any rules necessary to preserve the status of the association as a qualified pension plan under the provisions of the Internal Revenue Code of 1986, as amended, or under successor or related provisions of law; and

[(11)] (12) designate committees and designate committee members, including individuals who may not be members of the association.

B. The retirement board consists of:

(1) the secretary of state;

(2) the state treasurer;

(3) the state auditor;

[(3)] (4) four members under a state coverage plan to be elected by the members under state coverage plans;

[(4)] (5) four members under a municipal coverage plan to be elected by the members under municipal coverage plans, provided one member shall be a municipal member employed by a county; [and

(5)] (6) two retired members to be elected by the retired members of the association; and

(7) three members appointed by a majority of the other members for terms of four years who possess at least ten years of investment or public finance experience.

C. The results of elections of elected members of the retirement board shall be certified at the annual meeting of the association. Elections shall be conducted according to rules the retirement board adopts from time to time.

D. The regular term of office of the elected members of the retirement board is four years. The term of one retirement board member under a state coverage plan expires annually on December 31. The terms of retirement board members under a municipal coverage plan expire on December 31 of noncoinciding years in the pattern set by the retirement board. Members of the retirement board serve until their successors have qualified.

E. A member elected to the retirement board who fails to attend four consecutively scheduled meetings of the retirement board, unless in each case excused for cause by the retirement board members in attendance, is considered to have resigned from the retirement board, and the retirement board shall by resolution declare the office vacated as of the date of adoption of the resolution. A vacancy occurring on the retirement board, except in the case of an elected official, shall be filled by the remaining retirement board members, without requirement that a quorum be present. The member appointed to fill the vacancy serves for the remainder of the vacated term.

F. Members of the retirement board serve without salary for their services as retirement board members, but they shall receive those amounts authorized under the Per Diem and Mileage Act.

G. The retirement board shall hold four regular meetings each year and shall designate in advance the time and place of the meetings. Special meetings and emergency meetings of the retirement board may be held upon call of the [chairman] chair or any three members of the retirement board. Written notice of special meetings shall be sent to each member of the retirement board at least seventy-two hours in advance of the special meeting. Verbal notice of emergency meetings shall be given to as many members as is feasible at least eight hours before the emergency meeting, and the meeting shall commence with a statement of the nature of the emergency. The retirement board shall adopt its own rules of procedure and shall keep a record of its proceedings. All meetings of the retirement board shall comply with the Open Meetings Act. A majority of retirement board members shall constitute a quorum. Each attending member of the retirement board is entitled to one vote on each question before the retirement board, and at least a majority of a quorum shall be necessary for a decision by the retirement board.

H. Annual meetings of the members of the association shall be held in Santa Fe at such time and place as the retirement board shall from time to time determine. Special meetings of the members of the association shall be held in Santa Fe upon call of any seven retirement board members. The retirement board shall send a written notice to the last known residence address of each member currently employed by an affiliated public employer at least ten days prior to any meeting of the members of the association. The notice shall contain the call of the meeting and the principal purpose of the meeting. All meetings of the association shall be public and shall be conducted according to procedures the retirement board shall from time to time adopt. The retirement board shall keep a record of the proceedings of each meeting of the association.

I. Neither the retirement board nor the association shall allow public inspection of, or disclosure of, information from any member or retiree file unless a prior release and consent, in the form prescribed by the association, has been executed by the member or retiree; except that applicable coverage plans, amounts of retirement plan contributions made by members and affiliated public employers, pension amounts paid and the names and addresses of public employees retirement association members or retirees requested for election purposes by candidates for election to the retirement board may be produced or disclosed without release or consent."

Section 7. Section 22-11-3 NMSA 1978 (being Laws 1967, Chapter 16, Section 127, as amended) is amended to read:

"22-11-3. EDUCATIONAL RETIREMENT BOARD--MEMBERS--TERMS--VACANCIES.--

A. The "educational retirement board" is created.

B. The board shall be composed of [seven] ten members, consisting of the following:

(1) the [superintendent] secretary of public [instruction] education;

(2) the state treasurer;

[(3) one member to be elected for a term of four years by members of the New Mexico association of educational retirees;]

(3) the state auditor;

(4) the chief financial officer of a four-year state institution of higher education appointed by the governor;

[(4)] (5) one member to be elected for a term of four years by the members of the [New Mexico] national education association of New Mexico;

[(5)] (6) one member to be elected for a term of four years by the New Mexico members of the American association of university professors; [and

(6)] (7) two members to be appointed by the governor for terms of four years each;

(8) one member to be appointed by the governor for a term of four years who possesses at least ten years of investment or public finance experience; and

(9) one member to be appointed by the council of university presidents for a term of four years who possesses at least ten years of investment or public finance experience.

C. In the initial composition of the board, the member elected by the members of the American association of university professors shall serve for a term of three years; one member appointed by the governor shall serve for a term of two years; and the other member appointed by the governor shall serve for a term of one year.

D. Vacancies occurring in the [term] terms of office of those members appointed by the governor or the council university presidents or elected by an association shall be filled either by the governor or council appointing, or the association electing, a new member to fill the unexpired term."

Section 8. Section 22-11-13 NMSA 1978 (being Laws 1967, Chapter 16, Section 137, as amended) is amended to read:

"22-11-13. BOARD AUTHORITY TO INVEST THE FUND--PRUDENT INVESTOR STANDARD--INDEMNIFICATION OF BOARD.--

A. The board is authorized to invest or reinvest the fund in accordance with the Uniform Prudent Investor Act and may employ contractors, advisors or investment management services in any investment or reinvestment.

B. The board shall provide quarterly performance reports to the legislative finance committee and the department of finance and administration. Annually, the board shall ratify and provide its written investment policy, including any amendments, to the legislative finance committee and the department of finance and administration.

C. The board or its designated agent may enter into contracts for the temporary exchange of securities for the use by broker-dealers, banks or other recognized institutional investors, for periods not to exceed one year, for a specified fee or consideration. Such a contract shall not be entered into unless the contract is fully secured by a collateralized, irrevocable letter of credit running to the board, cash or equivalent collateral of at least one hundred two percent of the market value of the securities plus accrued interest temporarily exchanged. This collateral shall be delivered to the state fiscal agent or its designee contemporaneously with the transfer of funds or delivery of the securities. Such contract may authorize the board to invest cash collateral in instruments or securities that are authorized fund investments and may authorize payment of a fee from the fund or from income generated by the investment of cash collateral to the borrower of securities providing cash as collateral. The board may apportion income derived from the investment of cash collateral to pay its agent in securities lending transactions.

D. Commissions paid for the purchase or sale of any securities pursuant to the provisions of the Educational Retirement Act shall not exceed brokerage rates prescribed and approved by national stock exchanges or by industry practice.

E. Securities purchased for the fund shall be held in the custody of the state treasurer. At the direction of the board, the state treasurer shall deposit with a bank or trust company the securities for safekeeping or servicing.

F. The board may consult with the state investment council or the state investment officer; may request from the state investment council or the state investment officer any information, advice or recommendations with respect to investment of the fund; may utilize the services of the state investment council or the state investment officer; and may act upon any advice or recommendations of the state investment council or the state investment officer. The state investment council or the state investment officer shall render investment advisory services to the board upon request and without expense to the board. The board may also employ the investment management services and related management services of a trust company or national bank exercising trust powers or of an investment counseling firm or brokers for the purchase and sale of securities, commission recapture and transitioning services and may pay reasonable compensation for those services from funds administered by the board.

G. The board shall annually provide for its members no less than eight hours of training in pension fund investing, fiduciary obligations or ethics. A member elected or appointed to the board who fails to attend the training for two consecutive years shall be deemed to have resigned from the board.

H. Members of the board, jointly and individually, shall be indemnified from the fund by the state from all claims, demands, suits, actions, damages, judgments, costs, charges and expenses, including court costs and attorney fees, and against all liability, losses and damages of any nature whatsoever that members shall or may at any time sustain by reason of any decision made in the performance of their duties pursuant to this section."

Section 9. A new section of Chapter 6, Article 8 NMSA 1978 is enacted to read:

"[NEW MATERIAL] ALTERNATIVE INVESTMENT ADVISORY COMMITTEE.--

A. An alternative investment advisory committee shall be appointed by the council for any separate alternative investment asset class when the percentage of the portfolio invested by the council in that alternative investment asset class exceeds five hundred million dollars ($500,000,000) or ten percent. An alternative investment advisory committee shall consist of five members, one of whom shall be the state investment officer and four of whom shall be appointed by the council. Of the members appointed to the committee by the council, at least one, but not more than two, shall be a member of the council and the remainder of the members appointed by the council shall be public members who are not members of the council. All members appointed by the council shall be qualified by competence, experience and knowledge of the alternative investment asset class for which the advisory committee is created and shall have no less than five years of experience in the field of investment or finance.

B. Public members shall be appointed for three-year terms; provided that the terms of the initial committee members shall be staggered so that the term of one member expires each year. After the initial appointments, all public members shall be appointed for three-year terms. Members shall serve until their successors are appointed. A vacancy occurring other than by expiration of term shall be filled in the same manner as the original appointment but only for the unexpired term.

C. The council may dissolve an alternative investment advisory committee when the percentage of the portfolio invested by the council in that alternative investment asset class falls below five percent for a period of more than one year.

D. An alternative investment advisory committee shall review and make recommendations to the council on its designated alternative investment asset class and shall advise the council in matters and policies related to such investments.

E. Members of an alternative investment advisory committee shall receive per diem and mileage as provided for nonsalaried public officers in the Per Diem and Mileage Act and shall receive no other compensation, perquisite or allowance.

F. An alternative investment advisory committee shall elect annually a chair from among its members and may elect other officers as necessary. The committee shall meet upon the call of the chair.

G. Members of an alternative investment advisory committee are public employees within the meaning of the Tort Claims Act and are entitled to all immunity and indemnification provided under that act.

H. A person shall not be a member of an alternative investment advisory committee if any recommendation, action or decision of the committee will or is likely to result in direct, measurable economic gain to that person or that person's employer.

I. As used in this section, "alternative investment" means an asset class other than private equity investments as defined in Section 6-8-20 NMSA 1978, a traditional public equity or a fixed income mutual fund and includes New Mexico economic development investments, hedge funds, real estate and real assets."

Section 10. A new section of the Public Employees Retirement Act is enacted to read:

"[NEW MATERIAL] ALTERNATIVE INVESTMENT ADVISORY COMMITTEE.--

A. An alternative investment advisory committee shall be appointed by the retirement board for any separate alternative investment asset class when the percentage of the portfolio invested by the retirement board in that alternative investment asset class exceeds five hundred million dollars ($500,000,000) or ten percent. An alternative investment advisory committee shall consist of five members, one of whom shall be the chief investment officer of the association and four of whom shall be appointed by the retirement board. Of the members appointed to the committee by the retirement board, at least one, but not more than two, shall be a member of the retirement board and the remainder of the members appointed by the retirement board shall be public members who are not members of the retirement board. All members appointed by the retirement board shall be qualified by competence, experience and knowledge of the alternative investment asset class for which the advisory committee is created and shall have no less than five years of experience in the field of investment or finance.

C. The retirement board may dissolve an alternative investment advisory committee when the percentage of the portfolio invested by the retirement board in that alternative investment asset class falls below five percent for a period of more than one year.

D. An alternative investment advisory committee shall review and make recommendations to the retirement board on its designated alternative investment asset class and shall advise the retirement board in matters and policies related to such investments.

F. An alternative investment advisory committee shall elect annually a chair from among its members and may elect other officers as necessary. The committee shall meet upon the call of the chair.

G. Members of an alternative investment advisory committee are public employees within the meaning of the Tort Claims Act and are entitled to all immunity and indemnification provided under that act.

I. As used in this section, "alternative investment" means an asset class other than a traditional public equity or fixed income mutual fund and includes New Mexico economic development investments, hedge funds, private equity, real estate and real assets."

Section 11. A new section of the Educational Retirement Act is enacted to read:

"[NEW MATERIAL] ALTERNATIVE INVESTMENT ADVISORY COMMITTEE.--

A. An alternative investment advisory committee shall be appointed by the board for any separate alternative investment asset class when the percentage of the portfolio invested by the board in that alternative investment asset class exceeds five hundred million dollars ($500,000,000) or ten percent. An alternative investment advisory committee shall consist of five members, one of whom shall be the director and four of whom shall be appointed by the board. Of the members appointed to the committee by the board, at least one, but not more than two, shall be a member of the board and the remainder of the members appointed by the retirement board shall be public members who are not members of the board. All members appointed by the board shall be qualified by competence, experience and knowledge of the alternative investment asset class for which the advisory committee is created and shall have no less than five years of experience in the field of investment or finance.

C. The board may dissolve an alternative investment advisory committee when the percentage of the portfolio invested by the board in that alternative investment asset class falls below five percent for a period of more than one year.

D. An alternative investment advisory committee shall review and make recommendations to the board on its designated alternative investment asset class and shall advise the board in matters and policies related to such investments.

F. An alternative investment advisory committee shall elect annually a chair from among its members and may elect other officers as necessary. The committee shall meet upon the call of the chair.

G. Members of an alternative investment advisory committee are public employees within the meaning of the Tort Claims Act and are entitled to all immunity and indemnification provided under that act.

Section 12. TEMPORARY PROVISION--TRANSITION MEMBERSHIP OF STATE INVESTMENT COUNCIL.--

A. The three public members serving on the state investment council on July 1, 2010 shall continue to serve on the council until their term expires.

B. On July 1, 2010, members may be appointed pursuant to Paragraphs (6) through (9) of Subsection A of Section 6-8-2 NMSA 1978 and shall serve on an interim basis until confirmed by the senate; provided that the initial appointees shall, by lot, determine the terms of office for each position so that one position will be for an initial term of one year, two positions will be for initial terms of three years and one position will be for an initial term of five years. Thereafter, the terms shall be for five years.

C. After the appointments pursuant to Subsection B of this section, the members, including the members serving on an interim basis, shall select one of the members pursuant to Paragraph (10) of Subsection A of Section 6-8-2 NMSA 1978, who shall serve on an interim basis until confirmed by the senate and whose term shall be for five years. The other three members shall be appointed pursuant to Paragraph (10) of Subsection A of Section 6-8-2 NMSA 1978 as the terms of the public members serving on July 1, 2010 expire.

Section 13. EFFECTIVE DATE.--The effective date of the provisions of this act is January 1, 2011.

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