Pension Funds Team Up on Monster Beverage To Call For Board Diversity

Monster

Several public pension funds — including the massive New York State Common Retirement Fund – are calling for energy drink company Monster Beverage to increase the gender and racial diversity on its board.

Three pension funds have filed a shareholder proposal asking Monster to disclose any plans they have to increase the diversity of their board.

More from Pensions & Investments:

The $29.4 billion Connecticut Retirement Plans & Trust Funds, Hartford, $4.3 billion Philadelphia Public Employees Retirement System and Calvert Investments joined the $173.8 billion Albany-based pension fund as co-filers of the proposal.

“It’s unsettling that Monster Beverage has ignored repeated, widespread investor support for increased board diversity,” Thomas P. DiNapoli, New York state comptroller and sole trustee of the New York pension fund, said in the statement. “Company value and board diversity are linked. Businesses that rely on consumers should be particularly mindful that their boards should reflect the men and women who purchase their products. When a board fails to be responsive to its shareholders, it is often symptomatic of larger, systemic problems in the company’s governance.”

Monster directors and executives have been unresponsive to the New York pension fund’s efforts to discuss the issue, said Matt Sweeney, New York State Common spokesman, in an interview.

Monster’s response:

“Diversity is a part of the mix that Monster Beverage Corp.’s board and nominating committee consider when identifying and evaluating candidates for director. In fact, as stated in the company’s public filings, the nominating committee charter specifically includes diversity among the factors to be considered, along with experience, skills, and knowledge of business and management practices.”

The three pension funds collectively hold $57 million worth of Monster Beverage shares.

 

Photo By MrkJohn from Nottingham, England (Monster Troupe) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Video: State and Local Pension Reform – Can We Cut Costs and Improve Retirement Security?

This panel discussion, held by the Urban Institute, talks about pension reform at the state and local level. What do they mean for retirement security? And is there a way to cut costs for government without jeopardizing retirement security?

Panelists include researchers from the Brookings Institution, the Center for Retirement Research and the Urban Institute.

 

Cover photo by Matthias Ripp via Flickr CC License

Examining an Insider’s View of Canada’s Pension Debate

Canada

Last month, the Toronto Star interviewed Tom Reid of Sun Life to get an insider’s view of Canada’s pension debate. The interview can be read here.

This week, Leo Kolivakis of the Pension Pulse blog penned his own critical examination of the debate. The post can be read below.

____________________________________

By Leo Kolivakis, Pension Pulse

Indeed, the Canadian Life and Health Insurance Association is hopping mad and expressed its disappointment on its website.

The problem is that the CLHIA is spreading misinformation and outright lies on the so-called benefits of defined-contribution (DC) plans. They are nowhere near as safe and secure as defined-benefit (DB) plans and they’re a lot more costly, regardless of what Reid claims. They also don’t perform as well over long investment horizons because they don’t invest in private investments.

Go back to carefully read my comment on the brutal truth on DC plans, it’s a real eye-opener. We have become so ill-informed on this debate that we accept the lies and misinformation being spread out there.

As I’ve long argued on this blog, there is a case for boosting DB plans in Canada and elsewhere. The benefits of DB plans are well-known and under-appreciated.

Importantly, boosting DB plans, especially now that Canada’s crisis is just beginning (if you wait for “better economic conditions” you will never enhance the CPP!), makes for good retirement and economic policy. Why? Because if you do it properly, adopting world class governance standards, you will enhance economic activity, increase the revenue from sales taxes and reduce the overall debt of the country.

Of course, the insurance and banking industry don’t agree and will keep pushing the Conservatives to peddle PRPPs as the solution but they’re wrong and they know it. They’re petrified of Canada’s top ten and for good reason, when you look at the evidence, our large DB plans are doing an outstanding job providing their members with safe and secure retirement benefits. No DC plan can compete with our large DB plans.

Are Canada’s top ten perfect? Of course not. If they were, this blog would never exist. But take it from this insider, given a choice between anything Prudential, Sun Life, Manulife or Canada’s big banks have to offer and having your retirement money managed by our large DB plans, you should always opt for the latter. Period.

Does this mean that banks and insurance companies should get out of the retirement business altogether and just leave it up to our large DB plans? No, I believe there is a market for what they’re doing and they can certainly compete with the internal portfolio managers at our large DB plans but they’re going to have to lower their fees and change their angle.

In fact, if banks and insurance companies in Canada were smart (they’re hopelessly myopic!) and realized the bigger picture, they would be forcing the federal government to enhance the CPP for all Canadians and boost our DB plans.

I leave you with a comment Bruce Rogers wrote to the Toronto Star in regards to the interview above:

Thanks for devoting space to Ontario’s plans for a pension to supplement the Canada Pension Plan. Too bad your effort gave the platform to an interviewee who has a financial interest in the inadequate, defined contribution approach to the problem.

Our society clearly needs to take action to ensure that retirees and seniors generally enjoy financial security and a modicum of dignity. To argue against a more generous defined benefit approach is to ignore a serious problem.

Of course, the Harper government has made its decision and Bay Street will agree with that course. Let’s hope the business pages of the Star will balance the debate in future, perhaps by exposing the growing threat to defined benefit pensions where they exist.

This is an informed reader who understands what’s at stake. When it comes to retirement policy, we need to go Dutch on pensions and not take lessons from Down Under or worse, the United States of pension poverty.

Lastly, I wish the media in Canada would start interviewing real pension experts like Jim Leech, Leo de Bever, John Crocker and others who truly understand what is at stake and why we need to boost defined-benefit plans for all Canadians.

 

Photo credit: “Canada blank map” by Lokal_Profil image cut to remove USA by Paul Robinson – Vector map BlankMap-USA-states-Canada-provinces.svg.Modified by Lokal_Profil. Licensed under CC BY-SA 2.5 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Canada_blank_map.svg#mediaviewer/File:Canada_blank_map.svg

Chart: Negotiating Hedge Fund Expenses

cap negotiation

A recent survey asked investors: have you negotiated a cap on direct expenses with your hedge funds managers? This chart, above, displays the results.

The 2013 version of the same survey found that fees were the biggest obstacle for institutional investors looking to put money in hedge funds:

Screen shot 2014-11-07 at 2.27.22 PM

 

1st chart credit: Ernst & Young 2014 survey

2nd chart credit: Ernst & Young 2013 survey

New York City Council Weighs Disability Pension Boost For Police

NYPD

A New York City councilwoman is sponsoring a resolution that would ask the state to increase the disability pensions of certain city police officers.

The resolution has the support of two-thirds of the City Council, but doesn’t yet have the support of the mayor’s office or the Council speaker.

From Capital New York:

Under the current law, uniformed workers are placed into a tier system based on when they are hired. Workers with less time on the job only receive 50 percent of their pensions. Workers hired before 2009—the last time the law was changed —get 75 percent of their pension in disability benefits.

Crowley’s proposal would create parity among the different pension tiers for all employees of the uniformed services.

“Every emergency responder is taking the same risk, and every responder deserves the same disability benefits if they get hurt,” Crowley said.

Since it’s a law that can only be enacted at the state level, the Council must pass what is known as a “home rule message,” indicating to Albany that it supports the legislation and would urge the governor to sign it into law.

Last year, the Council failed to act on the resolution and never passed the home rule message, so the state Legislature was not able to move a corresponding bill. Similar legislation was passed in 2009, but then-governor David Paterson vetoed it.

The Council hearing has not been scheduled yet. The bill will also have to be reintroduced in Albany’s new legislative session before it can be sent to the floor for a vote.

[…]

De Blasio has said he would oppose because of concerns over its cost. But the mayor doesn’t have the power to veto this sort of Council resolution.

Council Speaker Melissa Mark-Viverito has said she is reviewing the request. Her spokesman said today that still hasn’t taken a position on it.

Similar pieces of legislation have been proposed on an annual basis since 2009. In 2009, the legislation was passed but subsequently vetoed by Gov. David Paterson.

Dutch Pension Drops Hedge Funds

Netherlands

The Netherlands’ second-largest pension fund has announced plans to exit its hedge funds investments.

The fund, PFZW, has already began the process of winding down the investments.

The fund cited complexity, lack of performance and excessive costs as reasons for the pullout.

From Reuters:

The Netherlands’ PFZW has become the latest major pension fund to announce it will no longer use hedge funds to manage investments, citing excessive costs, complexity and a lack of performance.

[…]

About 2.7 percent of the fund’s assets had been invested with hedge funds in the year 2013, but the pension fund said on Friday that it had “all but eradicated” their use by the end of 2014.

“With hedge funds, you’re certain of the high costs, but uncertain about the return,” the company’s manger for investment policy Jan Willem van Oostveen said.

He added that PFZW wanted to have greater control over of its investments, and that hedge funds’ methods were too complex because of their diverse investment strategies.

In September, the $300 billion California Public Employees’ Retirement System said it had scrapped its hedge fund programme, pulling out about $4 billion.

PFZW manages $185 billion in assets for the country’s health care workers.

Ex-CalPERS Hedge Fund Honcho Joins Chatham

building

Chatham Asset Management has hired the former chief of CalPERS’ hedge fund strategy, Ed Robertiello.

Ed Robertiello left CalPERS after the pension fund decided to pull its money out of hedge funds.

More from Bloomberg:

Robertiello started Jan. 1 as a partner and director of strategic development, the $1.7 billion Chatham, New Jersey-based firm told clients in a letter today. Robertiello left Calpers in December, three months after it decided to divest the $4 billion it had invested in hedge funds.

Pension funds face challenges meeting their obligations to retirees as the Federal Reserve holds interest rates near zero, said Evan Ratner, Chatham’s head of research.

“Ed’s been in this position for Calpers, so we believe he will prove invaluable in understanding investor needs,” Ratner said in an interview.

[…]

“Institutional investors are going to continue to allocate to the industry,” Robertiello said in a phone interview. “We want to make sure Chatham’s prepared for it.”

Chatham’s largest hedge fund, the Chatham Asset High Yield Master Fund, invests in speculative-grade bonds and leveraged loans.

Before joining Calpers in 2012, Robertiello was an executive involved in alternative investments at Russell Investments, Credit Suisse Group AG, and the Blackstone Group LP, according to the letter. He began his finance career investing RJR Nabisco Inc.’s retirement and trust assets.

“We appreciate Ed’s contributions to the Calpers investment office and his work on behalf of our members, and wish him the best with Chatham,” Calpers chief investment officer Ted Eliopoulos said in an e-mail.

In September 2014, CalPERS made the decision to exit its $4 billion hedge fund portfolio.

 

Photo by  rocor via Flickr CC License

Thailand’s Biggest Pension Looks to Slash Bond Allocation

Thailand

Thailand’s largest public pension fund is looking to slash its bond allocation (which currently sits at 77 percent of the fund’s assets) and invest a higher percentage of assets in equities and alternatives.

Yields on Thai government debt are at their lowest levels since 2009.

More from Bloomberg:

Thailand’s biggest government pension fund is seeking approval to reduce sovereign debt holdings as it buys local shares amid falling valuations.

The Social Security Office, which manages 1.2 trillion baht ($36.5 billion) in pension contributions from local workers, started boosting holdings of Thai shares last month after correctly predicting in October the market would retreat. The fund, which had about 77 percent of assets in local government bonds as of Sept. 30, is asking its board to approve a greater shift toward equity and alternative assets, said Win Phromphaet, the SSO’s head of investments.

Thailand’s benchmark equity index fell in December by the most in 16 months as oil’s retreat dragged down energy companies, while yields on government bonds sank to the lowest level in five years. The slump in shares has left valuations trading near the cheapest since August versus developing-nation peers, according to data compiled by Bloomberg.

“The SSO has an urgent need to boost investment in other assets than local bonds, whose returns keep falling,” Win said in a telephone interview yesterday. “The current correction in Thai equities makes them more attractive.”

The Social Security Office manages $36 billion in assets for the country’s public workers.

 

Photo by  Thangaraj Kumaravel via Flickr CC License

Why Pensions Rarely Sue Their Consultants, Managers

gavel

The UK’s British Coal Staff Superannuation Scheme has filed a lawsuit against consultant Towers Watson for investment losses stemming from allegedly “negligent investment consulting advice”.

These types of lawsuits – a pension fund suing their consultant or investment manager – are rare. Christian Toms, a lawyer who worked with a Dutch pension fund that sued its investment firm (Goldman Sachs) in 2012, explains why these situations are so rare.

From the Tally:

Why are these kinds of legal actions, where pension funds sue their investment consultants or fund managers, so rare?

Pension funds tend to look at legal actions in a different way to hedge funds or investment banks. They are very cautious about spending a lot of their members’ money pursuing something that’s not a ‘safe bet’. For this reason, the cases we see tend already to have a lot of meat to them – a clear failure to invest in a particular way that was promised, or a complex investment that was not right for the client.

Does the argument that investment is always risky, and investors should be aware they can lose their money, make these cases inherently harder to bring?

One of the big issues is this ‘hindsight’ argument. The focus of a legal case always has to be on what was going on at the time. Did the investment manager do enough due diligence on the investment? Did they properly understand the risks, and what the clients’ risk profile was? Would a reasonable manager have done what the investment firm did in this case?

This is particularly relevant for pension funds as they are not necessarily the most aggressive investors in the world, and if they end up in a riskier structure or a more complex investment than was necessary, that could give you grounds for an argument.

Toms also talks about the possibility that we could see more of these lawsuits:

Fiduciary management is a growth area in the industry. Could this lead to more disputes of this kind?

We are seeing this more and more. Consultants are taking on more asset management responsibilities. But even if they aren’t, there may still be grounds – a duty of care in relation to the advice given, perhaps. Was the advice appropriate?

In the Towers Watson/British Coal case, if they were specifically asked to implement a currency hedging strategy, it may be a question of what was appropriate. What was the need at the time and what did they do? Was what they did what a reasonable manager would do?

Generally, with pension funds, I’d say it would do all of them a benefit to more closely scrutinize their investment firms when something has gone wrong, rather than just saying ‘oh well, that’s life, it’s unfortunate, let’s fire the asset manager and move on’.

Read the full interview here.

 

Photo by Joe Gratz via Flickr CC License

UK Parliament May Require Pensions to Disclose Contracts With Asset Managers

big ben

UK pension funds could soon be facing higher transparency standards after Parliament members proposed measures recently to force pension funds to disclose contracts with asset managers.

From Investments and Pensions Europe:

Michael German, a Liberal Democrat peer in the UK upper house, tabled an amendment to the current Pension Scheme Bill – legislating for the introduction of defined ambition schemes – to allow members of trust schemes to request details of voting behaviour and the “selection, appointment and monitoring” of asset managers.

Nick Bourne, government whip in the Lords, said the amendments would go much further than currently proposed increases to scheme transparency, but that there was nonetheless merit in further examining all ideas tabled by German.

“However, we consider that greater transparency in relation to costs and charges, as well as about how schemes manage their investments, go hand in hand,” he said.

“As such, they would be better considered together as part of the same well-established transparency work programme, which is already under way and we are committed to consult on later this year.”

He said legislating for German’s proposals before the other changes surrounding fee disclosure came into force in April would risk introducing transparency in a “piecemeal and uncoordinated way”.

“Introducing these requirements through the amendment would remove the opportunity to consult all relevant stakeholders,” he said.

Instead, Bourne said the government would include the proposals in a forthcoming consultation planned by the Department for Work and Pensions, and could then potentially enact any changes as regulation.

ShareAction, which had been working with German on the amendment, welcomed the government’s commitment.

The responsible investment charity’s chief executive Catherine Howarth said: “We warmly welcome the government’s commitment to action that will give UK pension savers long overdue rights to information about what happens to their money.

“We urge pensions minister Steve Webb to move swiftly to set a consultation timetable to make these rights a reality in 2015.”

Read more about the proposed transparency standards here.

 

Photo by  @Doug88888 via Flickr CC License


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