Arkansas teachers’ retirement Fund strikes gold

Eureka!

The Arkansas Teacher Retirement System has literally struck it rich with recent investments in Canadian gold mining rivals, Barrick Gold Corp. and GoldCorp Inc.

Although ATRS has not invested directly in gold futures, which have appreciated more than 200% in the past five years, the state largest pension fund’s stake in Toronto-based Barrick and rival GoldCorp of Vancouver has pocketed the system an unrealized net of $34 million.

According to unaudited figures through Dec. 31, 2009, ATRS held 2,217,000 shares in Barrick Gold at a cost of $67.7 million, or $30.22 a share. Barrick’s year ending price of $39.38 valued the system’s stake at $87.3 million, or an unrealized gain of nearly $19.6 million.

Today, the system’s total exposure in Barrick is 1,848,400 shares. Stock in the Canadian gold miner was purchased by two different money managers at a cost of $57.7 million, or an average price of $31.24 per share. Altogether, the Barrick investment now has a market value of$79.4 million at the July 2 closing price of $43.34. That gives the system an unrealized gain of $21.6 million.

ATRS’ ownership stake in GoldCorp was also held in two accounts, costing the system $59.1 million at the end of 2009. At the year end share price of $39.34, ATRS’ GoldCorp investment had a market value of $72.7 million, or an unrealized gain of about $13.5 million.

At the close of business Friday, July 2, ATRS held nearly 1.4 million shares of GoldCorp — purchased at an average cost of $32.07 a share or $44.9 million. The system’s stake in GoldCorp was valued at $57.4 million on July 2, and would provide the system a gain of $12.5 million if it cashed out at the share price of $41.40.

According to ATRS annual reports, ATRS money managers began snapping up shares of Barrick and GoldCorp in the midst of the recession. In 2007 and 2008, Barrick and GoldCorp both moved into the system’s top 10 "domestic equities" holdings, and have added a tidy profit of $34 million to the system’s bottom line.

Generally speaking, gold mining stocks follow the price of gold. On June 21, gold futures touched a record high of $1,266.50 an ounce, up nearly 10% for the year.

"Gold is oftentimes viewed as a safe harbor in periods of economic uncertainty," said Greg Kaza, economist for the Arkansas Policy Foundation.

Not a bad investment, given that ATRS and other similar retirement funds are struggling to stay even. Despite double-digit losses of 18% in fiscal 2009, the state’s largest pension fund has managed to remain above $10 billion in total assets, according to a recent actuarial report.

Still, last year’s market woes increased the system’s unfunded liabilities from $2 billion to $3.4 billion. That means it would take the system 45 years, instead of 21 years, to pay off the system’s liabilities. The system’s board of directors also recently instituted a hiring freeze.

However, ATRS Executive Director George Hopkins remains upbeat about the upcoming fiscal year, which began July 1. In a recent Twitter post, Hopkins said told system retirees that May and June have been difficult months in the markets.

"ATRS has lost a part of the gains made earlier this year, (but) is still up well beyond the value it had last June 30," he said. "ATRS is still worth over $10 billion dollars (and) is well positioned to take advantage of the markets once fundamentals again become the predominant driver of market activity.”