The Texas Permanent School Fund was one of the first sovereign wealth funds ever created.
The Texas Permanent School Fund (Fund) was created with a $2,000,000 appropriation by the Legislature of 1854 expressly for the benefit of the public schools of Texas. These funds were available as a result of a $10 million payment from the United States government in exchange for giving up claims to western lands claimed by the former Republic of Texas. In 1854-55, the Fund’s first annual per student distribution for public education was 62 cents. By 1861, the Fund was depleted by railroad loan defaults, collapse of the Confederate monetary system, and eventual loan of the Fund to the Civil War effort. The Constitution of 1876 stipulated that certain lands and all proceeds from the sale of these lands should also constitute the Texas Permanent School Fund. Additional Acts later gave more public domain land and rights to the Fund.
Today the size of the fund is large.
The asset base of the Texas fund exceeds that of any university endowment—Harvard is at the top with $39.2 billion. Alternatives like private equity, hedge funds, and real estate account for almost half of the $34 billion of financial assets in the main PSF pool. The other $10 billion is managed separately and includes land and mineral rights.
The returns on the main pool have averaged a respectable 6.9% in the 10 years ending in August, worse than Yale University’s 7.4% return in the decade ending in September, but better than the 5.8% return on a broad group of college and university portfolios tracked by Nacubo-TIAA.
Post by Marcelino Pantoja