Pension360

Officials at the South Dakota Retirement System (SDRS) have spent the last two years studying a series of benefit changes that would hypothetically be applied to new members, according to the Black Hills Pioneer.

Last week, the System’s trustees got to look at the plan.

The changes include lower COLAs, a higher retirement age and tweaked benefit formula.

More on the specifics, from the Black Hills Pioneer:

The biggest change from the current system is retirement ages would be pushed back two years across the board. The current 65 would become 67, the current 55 would become 57 and the current 45 would become 47.

The new plan also would feature a variable-return component tied to investment performance. The basic cost of living increase meanwhile would tie directly to the rate of inflation with a raise of at least 1 percent guaranteed.

The current system provides an annual cost of living adjustment of 2.1 to 3.1 percent. The COLA approach now in use is generally independent of earnings, unless the investment portfolio’s value drops below certain thresholds.

[…]

Another change would be using five years of salary to determine final average compensation for calculating benefits under the new plan. The current plan uses three years.

Implementation of these changes is in the very early stages.

If the System’s trustees were to approve the changes, the proposal would then go to the state legislature for a vote.

SDRS manages about $10 billion in pension assets for nearly 80,000 members.

 

Photo by  Jim Bowen via Flickr CC License

The world’s largest pension fund said late last week that corporate governance and environmental/social responsibility would play a role in its stock-picking strategy, according to a Reuters report.

Japan’s Government Pension Investment Fund (GPIF) is in the midst of a portfolio overhaul that has the fund doubling its allocation to stocks.

More from Reuters:

In a mid-term plan announced on Thursday, GPIF said it would consider taking account of “environmental, social and governance” (ESG) factors in equity-investment decisions, while pursuing profits.

GPIF’s announcement helped buoy sentiment and push Tokyo shares up 1.5 percent on Thursday, but investors were skeptical whether the potential change would boost returns.

The plan offered no specifics about how this might affect its portfolio. Fund spokesman Shinichiro Mori said GPIF’s Investment Committee will discuss this issue.

“If you say you’re prioritizing the environment and such things and then your returns worsen, then it all comes to nothing,” said Masaru Hamasaki, head of market and investment information at asset management firm Amundi Japan.

“ESG and socially responsible investing aren’t directly linked to a company’s financials, so it’s not related to the stock price,” he said. “Paying attention to ESG won’t necessarily lead to outperformance.”

GPIF manages $1.1 trillion in assets, and is the world’s largest pension fund.

 

Photo by  penagate via Flickr CC License

New York lawmakers passed a series of ethics reforms late this week, but one portion of the package was conspicuously left on the Assembly floor: the proposal that dealt with pension forfeiture.

In short, the measure would have stripped pensions from public officials convicted of crimes related to their public work.

But lawmakers said they would vote on the measure when they come back for the next legislative session on April 21.

From Capitol Confidential:

Assembly Speaker Carl Hesatie said members will vote on and adopt a resolution to change the state constitution as it relates to pension forfeiture when they return for session April 21.

The legislation, which would extend the pension forfeiture law passed in 2011 to public officials who entered the retirement system before 2011, was passed by the Senate Tuesday night as other ethics reforms part of the state budget also passed. The constitutional update forces state officers, including legislators, who are convicted of public corruption to lose their state retirement benefits.

Changes to the constitution must be passed by two consecutive Legislatures. They then go on the ballot to be voted on by the general public.

Some lawmakers reportedly had concerns about the pension forfeiture proposal, because it requires a constitutional tweak.

 

Photo by Tim (Timothy) Pearce via Flickr CC License

The Canada Pension Plan Investment Board (CPPIB) is on the verge of buying an Indian “I.T. park” for nearly $242 million, according to a report from the Economic Times.

An “I.T. park” is a group of buildings that house technology-related firms; the tenants of this particular park include Amazon and HSBC.

More from the Economic Times:

The IT park, located on the Old Mahabalipuram Road, has close to 1.9 million sq ft of operational space, which is leased to firms such as HSBC, Amazon and Hapag Lloyd. Another 8.3 lakh sq ft of office space is under development. An e-mail questionnaire to Shapoorji Pallonji did not elicit any response. Tariq Vaidya, director at New Vernon, declined comment.

A spokesperson for Canada Pension Plan Investment Board (CPPIB) said the company does not comment on speculation regarding its investments.

[…]

“The companies are working on share swap as the property will be bought by the commercial platform of Shapoorji and CPPIB. New Vernon and Shapoorji will both exit the investment in the Chennai property,” said the [source]. The property will be bought at a capitalisation rate of about 9.2%.

CPPIB manages approximately $200 billion in assets and, as Pension360 has covered, has shown an interest in making direct investments in India.

 

Photo by sandeepachetan.com travel photography via Flickr CC License

The years-long lawsuit against Rhode Island’s 2011 pension changes is nearly settled, as it was announced on Thursday that most retirees and union members had approved the proposal.

The settlement rolls back a handful of the state’s 2011 pension changes, and will cost the state about $32 million annually in pension-related costs.

But Gov. Raimondo, who in previous weeks voiced her eagerness to settle the lawsuit, said the deal was “in the best interest of all Rhode Islanders.”

The settlement will impact 60,000 state workers and retirees, according to the Providence Journal.

What does it mean for their benefits?

ABC explains:

The settlement provides for cost-of-living increases and one-time stipends for retirees.

The cap for calculating the benefits would increase for some retirees, and the calculation would be based on a new formula using both the performance of investments and the Consumer Price Index. Employees would be allowed to retire earlier if they meet set requirements.

More specifically: the settlement gives a one-time, $500 stipend to retirees.

It also ensures that retirees will receive COLAs more frequently; under the old law, COLAs were only permitted once every few years, and only if the pension fund was 80 percent funded.

Not every party approved the settlement. From ABC:

The unions representing municipal police, Cranston police and Cranston fire, which collectively represent about 800 people, did not agree to the terms. Their lawsuits are continuing and will be addressed by the court after the settlement is implemented.

The settlement isn’t a done deal quite yet. Lawmakers now need to approve the terms, as well as a judge.

 

Photo credit: “Flag-map of Rhode Island” by Darwinek – self-made using Image:Flag of Rhode Island.svg and Image:USA Rhode Island location map.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons

A group of nine public pension funds – including CalPERS, CalSTRS and the New York Common Retirement Fund – this week wrote a letter to the SEC asking the agency to bulk up its rules regarding the disclosure of a company’s board diversity.

The letter can be read here.

More details from Pensions & Investments:

The pension funds called on the Securities and Exchange Commission to update its board nominee disclosure rules in order to help investors determine whether there is an appropriate mix of skills and backgrounds. “Better disclosure will lead to better investment decisions,” said North Carolina Treasurer Janet Cowell, sole trustee of the $88.8 billion North Carolina Retirement Systems, Raleigh.

The group called on SEC officials to update existing rules by requiring companies to create a chart or matrix of each nominee’s gender, race, ethnicity, skills, experiences and attributes. Citing more robust disclosure regimes in Australia, Canada, Singapore and the European Parliament, the group said that greater disclosure can prevent “groupthink.” The SEC’s 2010 amendments on disclosure show “no meaningful increase in diversity on corporate boards,” the letter said, adding that shareholder proposals will continue to press the case as well.

“As investors, we need better information on the makeup of our portfolio companies’ boards so we can assess whether they’re prepared to meet challenges or are letting groupthink creep in,” said New York state Comptroller Thomas P. DiNapoli, who is sole trustee of the $181.7 billion New York State Common Retirement Fund, Albany.

The entities that signed the letter include: Ohio PERS, the Washington State Investment Board, the New York City Retirement Systems, CalPERS, CalSTRS, the Illinois State Board of Investment, the Connecticut Retirement Plans & Trust Funds, and the North Carolina Department of the Treasurer.

In the wake of the Sandy Hook school shooting in 2012, many large pension funds considered divesting from gun manufacturers – or, forcing manufactuers to comply with a set of safety initiatives known as the Sandy Hook Principles.

Pension360 has covered that rising sentiment, and the names attached to the movement are big: the New York State and Local Retirement System, the Connecticut Retirement Plans and Trust Funds, the Philadelphia Board of Pensions, CalPERS, and others.

CalSTRS is one fund that pledged to divest from the company that manufactured the gun used in the Sandy Hook shootings.

But the investment hasn’t yet been sold, and teachers are now putting extra pressure on the pension fund to act.

From the Sacramento Bee:

The California Federation of Teachers plans a protest outside a CalSTRS board meeting in West Sacramento on Thursday, demanding the pension fund follow through on its pledge to unload its investment in Cerberus Capital Management, the private equity firm that owns gun manufacturer Freedom Group. A Bushmaster rifle manufactured by Freedom was tied to the shootings at Sandy Hook Elementary School in December 2012.

The protests, which are being labeled “teach-ins,” are tied to CalSTRS’ investment in Cerberus, valued at $375 million. CalSTRS was one of the most outspoken investors following the Sandy Hook massacre, saying it was reviewing its Cerberus investment and demanding that the firm sell off Freedom Group.

A CalSTRS spokesman said Wednesday that the pension fund can’t force Cerberus to unload the investment, nor can CalSTRS simply walk away from its Cerberus holdings.

“We still are invested in Cerberus, to our chagrin,” said spokesman Mike Sicilia of the California State Teachers’ Retirement System. “We share the frustration of those who ask us to divest.”

There are other barriers to divesting, too, including the contract it signed with Cerberus upon investment.

And, as is the case when any pension fund considers divestment, CalSTRS must decide whether its moral considerations should outweigh financial ones. From the Bee:

Sicilia said “contractual obligations” prevent CalSTRS from selling its investment with Cerberus. He wouldn’t go into details, but added, “We can’t walk; we’re in it.” Private equity firms such as Cerberus invest in companies that aren’t owned by public stockholders.

He said CalSTRS also must respect its obligation to generate as much profit as possible for its current and future retirees. The pension fund shouldn’t unload its Cerberus investment at a loss “without thoroughly exhausting all other options first.”

CalSTRS manages $190 billion in assets for the state’s retired teachers.

 

Photo by  Jim Wrigley Photography via Flickr CC License

Brazil’s second-largest pension fund is reeling after a year of scandal and investment losses.

The fund, Petro, is the pension fund for employees of the state-run oil company Petrobas, which has been embroiled in a corruption scandal for months.

As of January, Brazilian authorities had also been investigating the pension fund for alleged wrongdoing.

But Petros and the employees that rely on it have a bigger problem: the fund lost nearly $2 billion in 2014, or about eight percent of its value, according to a report from Bloomberg.

From Bloomberg:

Petroleo Brasileiro SA’s employee pension fund, known as Petros, lost more than 6 billion reais ($1.9 billion) last year, according to a person with direct access to the fund’s preliminary results.

The deficit widened from 2.4 billion reais in 2013 partly because of Brazilian share declines, the person said, asking not to be identified before results are released publicly. Petrobras’s balance sheet could be affected when Petros charges it for part of its losses, the person said.

The pension fund can’t comment on financial results that haven’t been formally approved and has until July 31 to file to regulators, it said in an e-mailed response to Bloomberg.

Petros had 158,000 participants at the end of 2013, according to regulatory filings. Brazil’s benchmark stock index fell 2.9 percent last year as economists forecast the first economic contraction this year since 2009. Internal rules would force Petrobras or its employees to allocate more funds to Petros if it registers a third straight year of losses.

Petros managed approximately $22 billion in pension assets as of 2013.