Category: Investments

CalPERS and CalSTRS Know Fossil Fuel Divestment is a Recipe for Disaster

Mary Pat Campbell

Link: https://alec.org/article/calpers-and-calstrs-know-fossil-fuel-divestment-is-a-recipe-for-disaster/

Excerpt:

In the Golden State, the California State Teachers’ Retirement System (CalSTRS) and the California Public Employees’ Retirement System (CalPERS) are waking up to the fact that divestment hurts retirees and taxpayers.

CalPERS and CalSTRS are two of the largest pension funds in the country (by both membership and portfolio size). As California Senate Bill 252, a bill calling for fossil fuel divestment from public retirement systems in California, continues to move along in committee, CalPERS and CalSTRS have publicly opposed the bill because it conflicts with their duties as pension plan managers.

As ALEC VP of Policy Lee Schalk and I mentioned in our OC Register column last month, politicized investment strategies are a recipe for disaster. Research from Mike Edleson and Andy Puzder found that ESG investing yields lower returns than investing without political constraints. Additionally, researchers at Boston College found that ESG has failed to achieve its stated social goals.

Both CalPERS and CalSTRS realize that divestment hampers their ability to put members’ retirements benefits first, and the research shows divestment does not achieve its stated social goals. 

Author(s): Thomas Savidge

Publication Date: 28 April 2023

Publication Site: ALEC

NGO Study IDs Vanguard, BlackRock as Big Climate-Change Villains

Mary Pat Campbell

Link: https://www.ai-cio.com/news/ngo-study-ids-vanguard-blackrock-big-climate-change-villains/

Excerpt:

Guess who the largest investors in climate-harming energy companies are? That would be major asset managers, with BlackRock and Vanguard Group the biggest offenders. So says an environmentalists’ report, “Investing in Climate Chaos.”

The report, spearheaded by Urgewald, a German environmental group, and conducted “in partnership” with more than 20 other nongovernmental organizations, comes down hard on two financial service stalwarts in particular: Vanguard, the mutual fund powerhouse, and BlackRock, the world’s largest asset manager.

Beyond those two, half of the stakes in fossil fuel companies identified in the report are held by just 23 investors. What’s more,18 of them are U.S.-based, the advocacy group stated, basing the report on data collected in January.

….

BlackRock has positions in oil and gas companies that account for two-thirds of the world’s yearly hydrocarbon production, per Urgewald. Its single largest energy holding is also Exxon, which is the firm’s ninth biggest equity position overall. . Although the asset manager has a policy against investing in any business that gets at least one-quarter of its revenue from coal, the report charged that BlackRock exempts power companies that use coal. “As a result, BlackRock remains the world’s largest investor in coal developers,” it said.

….

In the past, BlackRock has responded to critics on the right and the left by saying that, while it supports ESG, is not about to “dictate how clients should invest.” In a statement, it declared that “transition to a low carbon is in the interest of realizing the best long-term financial results for our clients.” 

Vanguard, also under GOP attack, has made much the same argument. It did raise environmentalists’ ire last year when it quit the investment-industry initiative on combating climate change, saying it wanted to “speak independently on matters of importance to our investors.” Some contended that Vanguard was just knuckling under to politicians’ pressure.

Author(s): Larry Light

Publication Date: 25 Apr 2023

Publication Site: ai-CIO

Nevada Bill Marks Third Try at Establishing State-Sponsored Retirement Plan

Mary Pat Campbell

Link: https://www.ai-cio.com/news/nevada-bill-marks-third-try-at-establishing-state-sponsored-retirement-plan/

Excerpt:

Nevada State Senator Dallas Harris is hoping the third time is the charm and has introduced a bill to create a state-supported retirement plan after two previous attempts by the legislature died on the vine.

The bill, SB305, would create the Nevada Employee Savings Trust, which would be directed by a board of trustees with the power to establish a retirement savings program and automatically enroll private employees who do not have a retirement savings plan available via their workplace. To be enrolled, an employee would need to be at least 18 years old, have worked at the same place for 120 days and have wages that are allocable to the state, although employees would be allowed to opt out.

….

The current bill stipulates that the board is required to establish one or more investment funds and that the underlying investments of each fund must be diversified “so as to minimize the risk of large losses under any circumstances.” The board also may, at any time, add, replace or remove any investment fund.

 The underlying investments may include shares of mutual funds, exchange-traded funds, publicly traded equity and fixed-income securities, as well as other investments available for investment. However, the investment funds would be prohibited from investing in any bond, debt instrument or other security issued by the state of Nevada.

Author(s): Michael Katz

Publication Date: 24 Apr 2023

Publication Site: ai-CIO

Recent SEC Proposals to Come Under Scrutiny of Financial Services Committee

Mary Pat Campbell

Link: https://www.ai-cio.com/news/sec-recent-proposals-to-come-under-scrutiny-of-financial-services-committee/

Excerpt:

The House Committee on Financial Services will hold an oversight hearing on the Securities and Exchange Commission next Wednesday and Chairman Gary Gensler is expected to testify. The SEC’s proposed budget and their recent proposals, especially the climate disclosure proposal will all likely be discussed.

The SEC requested $2.436 billion for 2024, an increase of $265 million from this year primarily to hire new staff. The new hires are proportionally concentrated in the Divisions of Risk Analysis and Investment Management, whose staffs would increase by more than 5% each. The largest aggregate staffing increase would be to the Division of Enforcement, from its current 1,505 positions to 1,558.

…..

Womack also suggested that the SEC’s proposal on climate disclosure, which would require entities registered with the SEC to disclose their carbon emissions, was not within the SEC’s legal authority, a concern shared by several other Republican members of the committee.

The climate disclosure proposal has been a sensitive issue for agricultural interests. Representative Ashley Hinson, R-Iowa, emphasized the potential impact of this rule on farmers at the hearing. She said that this proposal would be bad for farmers in her state who would have to collect and disclose their emissions data to issue securities and to work with larger businesses who must collect emissions data from their value chain.

Representative Michael Cloud, R-Texas, shared this sentiment during the hearing and said that any issuer subject to Scope 3 disclosure would compel farms in their supply chain to collect this data, a tedious process, which might reduce farmer’s access to credit if they do not comply.

Author(s): Paul Mulholland

Publication Date: 12 April 2023

Publication Site: ai-CIO

New York Common Commits $1.3 Billion to Sustainable Program

Mary Pat Campbell

Link: https://www.ai-cio.com/news/new-york-common-commits-1-3-billion-to-sustainable-program/

Excerpt:

The $242.3 billion New York State Common Retirement Fund has committed $1.3 billion to two funds as part of its Sustainable Investments and Climate Solutions program. It also earmarked more than $600 million to alternative investments in February.

The pension program committed $1 billion to funds tracking the MSCI World ex USA Climate Change Index, which overweights companies expected to benefit from the transition to a low-carbon economy and underweights companies facing greater climate change risks. A company’s carbon intensity, climate risk management, potential stranded assets, physical risk exposure and development of climate solution products and services are the key factors assessing these rankings.

….

Finally, within the pension fund’s emerging manager program, which invests in newer, smaller and diverse firms, $15 million was allocated to the Empire GCM RE Anchor Fund, which will focus on creating and acquiring industrial outdoor storage in the Netherlands, Germany and Sweden.

Author(s): Michael Katz

Publication Date: 10 April 2023

Publication Site: ai-CIO

State Pensioners Can Learn Lots From Rhode Island And Ohio Teachers

Mary Pat Campbell

Link: https://pensionwarriorsdwardsiedle.substack.com/p/state-pensioners-can-learn-lots-from

Excerpt:

Finally, and most important, this month there is an election for one active, or contributing member seat on the STRS board—the outcome of which will be determined in early May. If the reform coalition candidate wins this seat, it’s likely control of the board will shift. Then the concerns of the state auditor and reform-minded members will be addressed regarding the need to restore transparency, lower investment fees paid to Wall Street, improve investment performance and move toward restoring benefits previously promised. If so, STRS Ohio’s participant-driven reforms may serve as a template for all of the nation’s public pensions. (On the other hand, if our request for public records is granted by the Ohio Supreme Court later this year—and court-ordered transparency ensues—there may be little need for board action because any mismanagement or wrongdoing will have been exposed to the public.)

But here’s the big picture: Since all public pensions in America have moved like a herd, pouring over $1 trillion into many of the same high-cost, high-risk secretive alternative investments, if any single state pension—such as Rhode Island, or Ohio STRS—restores full transparency and releases alternative investment information to the public revealing widespread industry abuses and violations of law, all participants in public pensions which have also invested in these funds, as well as taxpayers, will benefit. One obscure pension fund board vote in Ohio could ultimately force the transparency and accountability Wall Street has successfully resisted for decades.

Author(s): Edward Siedle

Publication Date: 11 April 2023

Publication Site: Pension Warriors on substack

The Impact of Rising Rates on U.S. Insurer Investments

Mary Pat Campbell

Link: https://content.naic.org/sites/default/files/capital-markets-special-reports-impact-of-rising-rates.pdf

Graphic:

Excerpt:

As corporate bonds are mainly fixed rate, their relative value will decrease as floating rate investments
become more attractive with higher benchmark rates. That is, bond prices will fall as yields rise to make
them more attractive, given that their fixed-rate coupons will be lower. About half of insurer bond
investments are corporate bonds, and the vast majority of U.S. insurer corporate bond investments are
investment grade credit quality. From January 2022 to January 2023, the ICE Bank of America (BofA)
Investment Grade Corporate Bond Index, which measures the performance of investment grade
corporate debt, was down by about 14%.


Corporate bond yields have increased significantly since the beginning of 2022 with rising interest rates
and widening credit spreads. As of year-end 2022, investment grade and high-yield corporate bond
yields averaged 5.5% and 8.9%, respectively (refer to Table 1). Investment grade yields increased by
approximately 270 bps during 2022, while speculative-grade yields increased by about 370 bps.

Author(s): Jennifer Johnson and Michele Wong

Publication Date: 23 Feb 2023

Publication Site: NAIC Capital Markets Special Report

BlackRock, Fidelity Lose Out in $1 Trillion China Pension Market

Mary Pat Campbell

Link: https://finance.yahoo.com/news/blackrock-t-compete-free-advil-000000028.html

Graphic:

Excerpt:

China launched private pension plans for the first time last year and Beijing has ensured that domestic banks and fund managers win the vast majority of the new business in a market that may eventually grow to $1.7 trillion. Global companies including BlackRock and Fidelity International Ltd have been off to a slow start.

Given their tiny asset bases in China, most foreign money managers have so far been excluded from pilot trials in 36 cities, allowing banks like Industrial & Commercial Bank of China Ltd. and China Merchants Bank Co. to grab all the inflows. To cement their lead, the banks are offering everything from cash incentives to free ibuprofen for each new account.

“The first bite at the cake here won’t be easy” for foreign companies, said Zhou Yiqin, president of GuanShao Information Consulting Center, a financial regulations specialist.

While it’s still early days for the new pension scheme, the head start for domestic companies illustrates the daunting challenges for global firms eyeing a piece of China’s $60 trillion financial services sector. From mergers advice to stock sales and trading, Wall Street is struggling in a market that combines endless potential with stiff local competition and regulatory roadblocks.

China’s fledging private pension system is loaded with promise, as Beijing desperately tries to entice retirement savings to support an aging population. The number of people over 60 is expected to jump more than 50% by 2040, according to the World Health Organization. China’s population shrank last year for the first time in six decades.

To address the problem, China has launched three pension pillars. The first two — a compulsory state-backed plan and a voluntary corporate matching option — don’t come close to meeting the future needs of most pensioners. Savings in the government-led program covering urban employees may run out by 2032 and face a shortfall of more than 7 trillion yuan by 2035, according to Citic Securities Co. estimates.

Author(s): Bloomberg News

Publication Date: 28 Mar 2023

Publication Site: Yahoo Finance

What You Can Do To Force Your State Pension To Be Transparent About Its Investments

Mary Pat Campbell

Link: https://pensionwarriorsdwardsiedle.substack.com/p/what-you-can-do-to-force-your-state

Excerpt:

So what can you do to force your state or local government pension to be more transparent? That’s a question I asked Marc Dann, an attorney in private practice in Ohio and the former Attorney General of Ohio. (Dann is currently litigating a public records request on my behalf against the State Teachers Retirement System of Ohio.)

Say attorney Dann: “Refer to your state’s public records laws in making a request. Be as detailed and specific in the request as you can possibly be. Remember public records are only those records that may actually exist. For example, instead of asking for a list of all hedge, private equity or venture capital fund investments, ask for a prospectus, offering documents or reports provided to the pension by each investment fund (and name the investment funds—which are generally named on the state or local pension’s website).  Most states allow legal fee-shifting in public records lawsuits. So if the pension or fund resists, you may wish to consider bringing in a lawyer who agrees to be paid his fee from any recovery from the pension. Don’t forget to reach out to allied members of your state legislature or city council who can put pressure on the pensions to properly respond to the requests.”

Author(s): Edward Siedle

Publication Date: 22 Mar 2023

Publication Site: Pension Warriors on substack

Illinois Bill Would Give State Treasurer Voting Control On Pension Assets – Wirepoints

Mary Pat Campbell

Link: https://wirepoints.org/illinois-bill-would-give-state-treasurer-voting-control-on-pension-assets-wirepoints/

Excerpt:

Count on the Illinois legislature to find a way to further maim its crippled pension system.

Senate Bill 2152 would strip pension trustees of control over how to vote shareholder matters and vest the power in the state treasurer, currently, Michael Frerichs.

Still worse, the treasurer would then be bound to comply with the Illinois Sustainable Investing Act on how he votes on behalf of stocks owned by the pensions. That law requires officials like the treasurer to include “sustainability” considerations in how public money is invested. It’s basically a progressive policy agenda also known as ESG (Environmental, Social, Governance). It’s often ridiculed as “woke capitalism,” and includes the goals of zero fossil fuels, “equity,” gender and identity politics, and pretty much any other social justice fad in vogue.

….

Shareholders, including pensions, usually have the right to vote on key corporate issues such as board of director elections, rights offerings, mergers and acquisitions. For interests in private investment partnerships, which pensions also hold, voting powers include other major matters. If the bill becomes law, Frerichs, or whoever is treasurer, would hold a proxy for all those votes and execute ballots, voting as he alone decides — a huge concentration of power in one individual.

The bill would eliminate any fiduciary obligation to vote shares in a way that maximizes their value, diluting that goal with progressive’s political agenda. Today, pension managers are fiduciaries for pensioners – a strict, legal standard — but the treasurer would not be if the bill becomes law.

Author(s): Mark Glennon

Publication Date: 17 Mar 2023

Publication Site: Wirepoints

Ohio State Teachers Retirement System Had Massive Investment in Failed Bank

Mary Pat Campbell

Link: https://news.yahoo.com/ohio-state-teachers-retirement-system-200100935.html

Excerpt:

Already under fire for high pay despite big investment losses, the pension system for Ohio’s retired teachers lost between $27 million and $40 million when Silicon Valley Bank failed last weekend. That appears to be by far the biggest investment by a public pension system in the United States.

The losses follow a nearly $10 million loss last year when cryptocurrency platform FTX failed, according to the Ohio Retired Teachers Association, a group that represents pension system members.

The exact losses aren’t immediately known because Anthony Randazzo, executive director of pension watchdog Equable, said they were $39.3 million in a tweet. But pension system spokesman Dan Minnich said in an email, “As of last Wednesday, STRS Ohio held shares of Silicon Valley Bank (SVB) worth $27.2 million.”

Author(s): Marty Schladen

Publication Date: 16 Mar 2023

Publication Site: Yahoo News

Yellen Said “No Bailout” But It’s a Huge Bailout of the Banking System

Mary Pat Campbell

Link: https://mishtalk.com/economics/yellen-said-no-bailout-but-its-a-huge-bailout-of-the-banking-system

Excerpt:

It won’t matter but I am pleased the Journal blasted Bill Ackman and venture investor David Sacks,  as “frantic panic spreaders“.

There’s more in the article about how Rohit Chopra, an Elizabeth Warren acolyte on the FDIC board, is hostile to bank mergers on ideological grounds, perhaps preventing a merger.

The Journal speculates how Biden might illegally act to guarantee all deposits or pressure House Speaker Kevin McCarthy.

….

Once again, the Fed kept interest rates too low, too long, encouraged speculation, then bailed out the banks.

Spare me the sap about this was a depositor bailout not a bank bailout. 

When you value assets at par so that banks don’t have losses, what the hell is it.

Author(s): Mike Shedlock

Publication Date: 12 Mar 2023

Publication Site: Mish Talk