How is the 5% cap on alternative investments calculated for the Georgia Firefighters' Pension Fund: by committed amount, current market value, or actual cost paid?

Plain-English summary

The Executive Director of the Georgia Firefighters' Pension Fund asked how the 5% cap on alternative investments under O.C.G.A. § 47-7-127(d) was supposed to be measured. There were three plausible methods: (1) the committed amount the Fund had pledged to invest, (2) the net amount actually paid for current portfolio holdings (historical cost), or (3) the current market value of the holdings.

The Attorney General said historical cost. The reasoning is statutory cross-reference. The Firefighters' Pension Fund is required by O.C.G.A. § 47-7-23(b) to comply with Article 7 of Chapter 20 of Title 47, the "Public Retirement Systems Investment Authority Law." That law's general investment-limitation rule is in § 47-20-82(c): "Any investment limitation based upon the amount of the fund's assets shall relate to such assets on the basis of the assets' aggregate historical cost." Reading § 47-7-127(d) together with § 47-20-82(c) (statutes in pari materia), the 5% cap is measured against historical cost.

The Firefighters' Pension Fund was at the time the only public fund in Georgia approved to invest in alternative investments. Effective July 1, 2010, the General Assembly added § 47-7-127 to define "alternative investments" (private equity, hedge funds, infrastructure, etc.) and to set a 5% aggregate cap. The cap question matters operationally because committed-amount and market-value measurements would each give different and shifting numbers, while historical cost is fixed at the time of purchase.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: What are "alternative investments"?
A: O.C.G.A. § 47-7-127 defines specific categories of non-traditional investments that the Firefighters' Pension Fund can hold: private equity, venture capital, hedge funds, real estate, infrastructure, and similar. Alternative investments are typically illiquid, less transparently priced, and have different risk profiles from public stocks and bonds.

Q: Why use historical cost instead of market value?
A: Practical administrability. Alternative investments are illiquid and often lack reliable daily market prices. Marking to market would require constant valuation work and would cause the cap measurement to fluctuate with each valuation update. Historical cost is fixed and easily auditable. The General Assembly's choice in § 47-20-82(c) reflects this practical concern across all public retirement system investments.

Q: What if the historical cost calculation puts the Fund over 5%?
A: § 47-7-127(d) provides for a transition period: "If the fund is not in compliance with the limitations imposed by this subsection, it shall make a good faith effort to come into compliance within two years and in any event as soon as practicable thereafter." During noncompliance the Fund cannot increase its committed alternative investment percentage but may continue to honor existing commitments.

Q: Why is this cap necessary at all?
A: To limit risk concentration. Alternative investments offer diversification benefits and potentially higher returns but also carry greater illiquidity risk and valuation uncertainty. A 5% cap balances those benefits against the need to keep the bulk of the Fund in more traditional, liquid investments where the Fund can pay benefits without market-timing risk.

Q: Is the Firefighters' Pension Fund still the only Georgia public fund authorized to use alternative investments?
A: At the time of this opinion in 2012, yes. The opinion is explicit: "The Georgia Firefighters' Pension Fund is the only public fund in the State of Georgia currently approved to invest in alternative investments." This may have changed in subsequent legislative sessions; readers should verify the current law.

Q: What is the relationship between O.C.G.A. § 47-7-127 and the broader Public Retirement Systems Investment Authority Law?
A: § 47-7-23(b) makes the Firefighters' Pension Fund subject to "all the terms, conditions, limitations, and restrictions imposed by Article 7 of Chapter 20." Section 47-7-127(b) and (d) reference Code sections 47-20-82, 47-20-83, and 47-20-84. The Fund operates under both its own enabling statute (Title 47, Chapter 7) and the cross-cutting investment authority law (Title 47, Chapter 20, Article 7). When the two are read together, the historical-cost rule from the cross-cutting statute applies to the Fund-specific 5% cap.

Background and statutory framework

Georgia's public retirement systems are governed by a layered statutory architecture. Each system has its own enabling statute (TRS in Title 47, Chapter 3; ERS in Chapter 2; Firefighters' Pension Fund in Chapter 7; etc.). The cross-cutting investment authority law, Title 47, Chapter 20, Article 7, sets common rules for eligible investments and investment limits. The 2012-2 opinion's statutory-construction approach (in pari materia, presumption of legislative knowledge of existing law) is standard for resolving cross-references between these layers.

The Firefighters' Pension Fund was authorized to invest in alternative investments effective July 1, 2010, by HB 202 of the 2010 session. The 5% cap under § 47-7-127(d) was the legislative compromise: alternative investments were authorized but limited to a small portion of the portfolio. The 2012-2 opinion fills in the operational detail of how to measure that 5%.

Citations and references

Statutes:
- O.C.G.A. § 47-7-127(d), 5% alternative investment cap (the central provision)
- O.C.G.A. § 47-7-23(b), Firefighters' Pension Fund subject to Article 7 of Chapter 20
- O.C.G.A. § 47-20-82(c), historical-cost rule for investment limitations
- O.C.G.A. §§ 47-20-83, 47-20-84: related investment authority provisions

Cases:
- City of Roswell v. City of Atlanta, 261 Ga. 657 (1991), statutes construed to effectuate legislative intent
- Ryan v. Comm'rs of Chatham Cnty., 203 Ga. 730 (1948), statutes in pari materia construed together
- Wigley v. Hambrick, 193 Ga. App. 903 (1989), General Assembly presumed to know existing law

Source

• Landing page: https://law.georgia.gov/opinions/2012-2
• Original PDF: not linked from landing page

Original opinion text

This responds to your request for my official opinion on how the limitation within O.C.G.A. § 47-7-127(d) on the amount of the Georgia Firefighters' Pension Fund's assets that can be invested in alternative investments is defined. Specifically, you have requested that the following question be answered: "In calculating the amount of alternative investments for determining the 5% cap, is the amount of the investment based on committed amount, the net amount actually paid by the Fund for the current portfolio holdings, or the market value of the investments?" The Georgia Firefighters' Pension Fund is the only public fund in the State of Georgia currently approved to invest in alternative investments. Effective July 1, 2010, the General Assembly enacted O.C.G.A. § 47-7-127, entitled "'Alternative investments' defined; code of ethics." This statute lists the acceptable forms of alternative investments and the allowed percentages of specific types of alternative investments, defines proprietary information, and sets out reporting requirements for the alternative investments. Of importance to this opinion is O.C.G.A. § 47-7-127(d), which states as follows: Alternative investments by the fund may not in the aggregate exceed 5 percent of fund assets at any time. The board shall have the discretion to designate whether any investment that is permitted to be made as an alternative investment pursuant to this Code section and is also permitted to be made as an investment pursuant to Code Section 47-20-83 shall be treated for purposes of the 5 percent limitation and otherwise as an alternative investment made pursuant to this Code section or as an investment made pursuant to Code Section 47-20-83. If the fund is not in compliance with the limitations imposed by this subsection, it shall make a good faith effort to come into compliance within two years and in any event as soon as practicable thereafter; provided, however, that during any period of noncompliance the fund shall not increase the percentage of its assets committed to be invested in alternative investments but shall be permitted during such period to continue to make investments as required by the then existing commitments of the fund to alternative investments made before the period of noncompliance. (Emphasis added.) The statute is silent on how the 5 percent limitation on alternative investments in the fund is to be calculated. When interpreting statutes, one "must look for the intent of the legislature and construe statutes to effectuate that intent." City of Roswell v. City of Atlanta, 261 Ga. 657 (1991). "It is an elementary rule of statutory construction that a statute must be construed in relation to other statutes of which it is a part, and all statutes relating to the same subject-matter, briefly called statutes 'in pari material,' are construed together, and harmonized wherever possible, so as to ascertain the legislative intendment and give effect thereto." Ryan v. Commr's of Chatham Cnty., 203 Ga. 730, 731-32 (1948). "[A]ll statutes are presumed to be enacted by the legislature with full knowledge of the existing condition of the law and with reference to it [and] they are to be construed in connection and in harmony with the existing law . . . ." Wigley v. Hambrick, 193 Ga. App. 903, 905 (1989). It is instructive to review other statutes related to the establishment of the Georgia Firefighters' Pension Fund. Specifically, O.C.G.A. § 47-7-23 lists the powers and duties of the Board of Trustees of the Georgia Firefighters' Pension Fund and states in subsection (b) that [t]he board shall have the full power to invest and reinvest such funds subject to all the terms, conditions, limitations, and restrictions imposed by Article 7 of Chapter 20 of this title, the 'Public Retirement Systems Investment Authority Law.' Subject to such terms, conditions, limitations, and restrictions, the board shall have full power to hold, purchase, sell, assign, transfer, and dispose of any of the securities and investments in which any of the funds are invested, including the proceeds of any investments and money belonging to the fund. (Emphasis added.) Further, O.C.G.A. § 47-7-127(b) and (d) reference the requirements in O.C.G.A. §§ 47-20-82, 47-20-83, and 47-20-84. As Code section 47-7-23 states that the fund is subject to Article 7 of Chapter 20, and the statute in question refers to the statutes making up the Public Retirement Systems Investment Authority Law, it is then necessary to review those particular statutes for guidance in determining how the limitation on alternative investments is to be calculated. Specifically, O.C.G.A. § 47-20-82, entitled "Investing funds; eligibility; investment limitation," states: Funds shall invest in or lend their assets on the security of, and shall hold as invested assets, only eligible investments as prescribed in this article. Eligibility of an investment shall be determined as of the date of its making or acquisition. Any investment limitation based upon the amount of the fund's assets shall relate to such assets on the basis of the assets' aggregate historical cost. (Emphasis added.) Thus, O.C.G.A. § 47-20-82(c), as made applicable to the Fund by O.C.G.A. § 47-7-23(b), provides that the five percent limitation in O.C.G.A. § 47-7-127(d) is to be based on the assets' aggregate historical cost. Therefore, it is my official opinion that the five percent limitation on alternative investments for the Georgia Firefighters' Pension Fund is to be based upon the assets' aggregate historical cost. Prepared by: Robin J. Leigh Assistant Attorney General