The Issue — Up to $155M in Arkansas Pension Funds Authorized Without Independent Analysis

The instrument

What are Israel Bonds?

Israel Bonds are direct loans to the Israeli government, sold through the Development Corporation for Israel. Unlike U.S. Treasury bonds and most other fixed-income securities, they have two critical features that matter for pension fund managers:

No secondary market. Israel Bonds cannot be sold or traded before maturity (per the bond prospectus — a characteristic of the instrument, not a FOIA finding). A pension fund that purchases them is locked in — unable to exit the position if conditions change, if better opportunities arise, or if the fund needs liquidity.
Lower credit ratings. All three major rating agencies — Moody’s, S&P, and Fitch — have downgraded Israel’s credit rating since 2024, specifically citing economic instability and heightened security risks. This means Israel Bonds carry more risk than many comparable alternatives with similar interest rates.

In practical terms: an Arkansas pension fund that buys Israel Bonds is accepting less liquidity and more risk than it would with many other available fixed-income investments. The question is whether that trade-off was made based on sound financial analysis.

The exposure

What’s happening in Arkansas?

Three Arkansas state agencies have committed or authorized significant funds for Israel Bonds:

Agency	Amount	Portfolio Share	Date
State Treasury	$55 million in holdings (including $20M purchased since May 2025)	~0.5% of $11B	Ongoing since 2017
ATRS (Arkansas Teacher Retirement System)	Up to $50 million authorized	~0.2% of $23.7B	June 2, 2025
APERS (Arkansas Public Employees’ Retirement System)	$25–50 million authorized; purchase confirmed by Nov 2025	~0.2–0.4% of $11.92B	May 15, 2025 (subcommittee); June 11, 2025 (full board)

(Note: The $155 million figure represents total authorized exposure. APERS authorized up to $50M but had not yet purchased as of July 2025 per FOIA records; actual current holdings are approximately $105 million.)

While the portfolio percentages are small, the question is whether standard fiduciary process was followed — not whether the amounts are material.

These authorizations came in rapid succession — and under circumstances that raise questions about process:

In late 2024, a senior investment manager in the State Treasurer’s office wrote an internal memo advising against new Israel Bonds purchases, citing credit-rating downgrades by major rating agencies. The memo recommended the state “hold our positions and allow for the $17M to roll off.”
In April 2025, Israel Bonds sales representatives met with the directors of both ATRS and APERS, along with the State Treasurer and State Auditor.
Within weeks, the Treasury purchased $20 million in new bonds, and both pension boards voted to authorize up to $100 million more in combined Israel Bonds investments.

July 2025: Two months after APERS’s board authorized $25–50 million, Executive Director Amy Fecher confirmed no bonds had been purchased: “Still zero for APERS.” Staff were still establishing contact with Israel Bonds representatives the next day.

September 2025: ATRS formalized its Israel Bonds approach through Reams Asset Management, establishing written investment guidelines for an “Israeli Jubilee bond account” — four months after board authorization.

November 2025: APERS received its first Israel Bonds statement, confirming a purchase had eventually occurred after the months-long delay.

February 2026: Second round of FOIA responses received from Treasury (118 documents), APERS (16 documents including an 8,648-page production), and ATRS (7 documents, partial response). Total investigation corpus now stands at 1,098 documents.

What changed between the late-2024 recommendation to hold and the spring 2025 buying spree? Not the credit ratings — those continued to decline. Not the financial outlook — the risks identified in the internal memo remained. The only thing that changed was the political pressure.

The legal standard

The fiduciary problem

Arkansas law is clear about how pension investments must be made:

Sole interest rule: Trustees must invest assets “solely in the interest of the members and benefit recipients of the trust” (Ark. Code Ann. § 24-2-614).
Pecuniary factors only: Under the Protecting Arkansas Investments Act (Act 411 of 2023), the Treasurer’s evaluation of an investment “shall be based only on pecuniary factors” — those with a material financial effect on risk or return.
Prudent investor standard: Trustees must manage assets with the care an experienced, prudent investor would use, with appropriate attention to risk, return, and diversification (Ark. Code §§ 24-2-610–619).

Several red flags suggest these standards may not have been followed:

The ATRS Board Chair dissented. Danny Knight, the lone “no” vote on the June 2025 authorization, warned that selecting a specific bond at a trustee’s request was “going outside of the scope of the way we usually do things.” ATRS typically relies on professional investment managers — not board members — to recommend specific securities.

No independent credit analysis was produced. Our review of nearly 1,100 public records obtained through FOIA requests to four state agencies found zero independent credit analyses of Israel Bonds prepared before the authorizations. The normal process — where investment consultants provide written recommendations — appears to have been bypassed. (The Treasury’s own investment policy establishes the standards that should have governed this decision.)

Two pension funds, no independent analysis either way. APERS chose to purchase Israel Bonds directly without an external investment manager, with its CIO stating there was “not a need to incur management fees.” ATRS, by contrast, hired Reams Asset Management — but established its investment guidelines four months after the board authorized the purchase. Neither approach included independent credit analysis before authorization.

The investment was championed through political channels. State Auditor Dennis Milligan, an ex officio trustee on both the ATRS and APERS boards, arranged meetings between Israel Bonds sales representatives and state officials. In a reply to the Auditor’s office, an Israel Bonds executive called Milligan “truly one of a kind” and said he was “forever grateful” for his support — language that describes a political relationship, not a standard financial transaction.

The conduit chain is now documented. At the APERS board meeting, Jason Brady — the Auditor of State’s appointee — introduced Israel Bonds by telling fellow trustees “it had come to his attention” that the investment was available, citing Treasury’s $55 million in holdings. The board approved $25–50 million without independent financial analysis. Brady’s appointment traces directly to Milligan, connecting the former Treasurer’s Israel Bonds advocacy at Treasury to the pension fund authorizations.

Public statements emphasized political symbolism, not financial merit. Governor Sanders publicly stated that “Arkansas puts its money where its mouth is and is investing millions in Israeli bonds.” Former Treasurer Larry Walther called investing in Israel Bonds “a testament to our longstanding belief in Israel’s resiliency […]” At the APERS Investment Subcommittee meeting, Deputy Auditor Jason Brady referenced the U.S. Ambassador to Israel (former Arkansas Governor Mike Huckabee) as “my and Amy’s former boss” and called Israel “the United States’ most trusted and dependable ally in a volatile region.” None of these are pecuniary factors.

The pattern is clear: the idea for these investments originated through political channels, was promoted by a state official with explicit non-financial motivations, bypassed the normal professional recommendation process, overrode internal staff advice against new purchases, and was publicly celebrated as a political statement. Whether the bonds happen to be “investment-grade” does not answer the question of whether the process met Arkansas’s fiduciary standards.

The principle

The symmetry argument

Arkansas law already establishes the principle at the heart of this issue. Act 710, the state’s anti-boycott law, prohibits state entities from refusing to do business with companies for political reasons. The rationale: investment decisions should be based on financial merit, not political pressure.

We agree. That principle should apply equally in both directions.

If it is wrong to sell an investment for political reasons, it is equally wrong to buy one for political reasons. The standard is the same: pecuniary factors only.

If Arkansas law protects against politically motivated divestment, it should also protect against politically motivated investment.

Our campaign is not asking for anything that Arkansas law does not already require. We are asking:

Were these investments made through the standard process of independent financial analysis?
Were they evaluated solely on pecuniary factors — risk, return, and liquidity?
Were the internal staff recommendations against new purchases given proper weight?
Can the state produce the documented, independent credit analysis that prudent investment requires?

These are not political questions. They are fiduciary questions. And Arkansas pension beneficiaries — teachers, public employees, and retirees — deserve answers.

Read the source documents yourself — we’ve published key FOIA documents for public review.

The ask

What we’re asking for

Our requests are straightforward:

Pause — Halt new Israel Bonds purchases until an independent credit analysis is completed and shared with pension fund members.
Transparency — Publish the financial analysis comparing Israel Bonds’ risk, return, and liquidity against comparable fixed-income alternatives.
Process review — Document how the recent authorizations complied with Arkansas’s pecuniary-only standard and the normal manager-driven investment process.
Member input — Invite public comment from the educators, public employees, and retirees whose retirement savings are at stake.
Pension Investment Transparency Act — Issuer-neutral legislation requiring independent analysis, consultant independence, liquidity disclosure, documented rationale, and consistent application of the pecuniary-factors standard before pension boards commit to non-tradable sovereign debt.