pension fund management

Incoming Massachusetts Governor to Push for Transparency at MBTA Fund

Massachusetts Governor-elect Charlie Baker says he will push for more transparency and openness from the MBTA retirement fund.

Baker’s statements come days after it was reported by the Boston Globe that the pension fund posted its annual report a full year late; the fund also waited a year to disclose troubles at a hedge fund that held pension money. The hedge fund is now shutting down in the wake of civil fraud charges brought against its executives.

From the Boston Globe:

The incoming Baker administration will press for greater openness at the MBTA retirement fund and encourage it to operate more like other pensions for public workers, a spokesman for Governor-elect Charlie Baker said Monday.

“The governor-elect wants to protect the pensions of hard-working MBTA employees and feels greater transparency and disclosure could help the pension board make better investment decisions,’’ the spokesman, Tim Buckley, said in a statement. Given the significant investment of taxpayer dollars in the MBTA, he said, Baker “feels it is appropriate to explore ways to align the MBTA pension board’s investment practices with those of other public pension boards.”

[…]

Baker’s spokesman declined to offer specifics on how he might tackle the issue. The pension fund is organized as a trust and in 1993 won a Supreme Judicial Court ruling that it does not have to make records public, hold open meetings, or follow the ethics rules of public agencies.

[…]

A governor’s main leverage with the MBTA pension fund is indirect. Governors get to appoint people to the seven-member Department of Transportation board, which in turn sends three “management” appointees to the six-member T retirement board.

Read more Pension360 coverage of transparency issues at the MBTA fund here.

Photo by Marissa Babin via Flickr CC License

Experts: Japan Pension Should Be Run By Board, Not President

Currently, Japan’s Government Pension Investment Fund (GPIF) – the largest pension fund in the world – is managed by a President.

The sole trustee system is rare; it is used by a few pension funds in the United States, but more typically a board of trustees is utilized to make investment policy and governance decisions.

Now, experts are calling on the GPIF to switch to a board of trustees model.

From the Wall Street Journal:

[The] Government Pension Investment Fund should be managed by a board of directors rather than a president, as is currently the case, a panel of outside experts has concluded.

[…]

“If the coach plays with the players in a sports game, if there are mistakes in the game, it’s hard for the coach to make the tough calls he should be making as coach,” said Shuya Nomura, a Chuo University professor who was appointed last month as an adviser to the welfare minister on GPIF issues, referring to how the board of directors should be structured.

The meeting ran 30 minutes over the scheduled time as members argued over whether you could compare the GPIF to the Bank of Japan 8301.TO -0.21% or a public company. They also couldn’t reach consensus about how a nomination panel to appoint fund officials should be structured.

Perhaps it shouldn’t come as a surprise that the group has differed on some issues. Welfare Minister Yasuhisa Shiozaki, an Abe appointee and a staunch advocate of an aggressive overhaul of the fund’s management, pushed hard for the group to be formed, and some of its members have expressed views similar to his. But bureaucrats at the health ministry, which oversees the GPIF, argued that the group should include more cautious voices.

The group will present its ideas to the health ministry panel for further discussion, and eventually the ministry will draft a law to submit to parliament.

The GPIF manages $1.1 trillion in assets.

Photo by Ville Miettinen via Flickr CC License

Brazil Fines Pension Fund Over Board Voting Violation

Brazil’s securities regulator fined one of the country’s largest pension funds Tuesday for violating rules regarding the election of board members of Brazilian companies in which the pension fund is invested.

Reuters reports:

Brazil’s securities industry watchdog CVM fined late on Tuesday the pension fund owned by workers of state-controlled oil producer Petróleo Brasileiro SA (PETR4.SA) for participating on the election of board and fiscal council members that was reserved only for minority shareholders.

In a statement, the CVM imposed total fines of 800,000 reais ($311,700) on Petros, as the fund is known. The watchdog also issued warnings to but did not fine the workers’ pension funds of state-run banks Banco do Brasil SA (BBAS3.SA) and Caixa Econômica Federal SA [CEF.UL] for the same cases.

The decision underpins the mounting conflict of interest between pension funds like Petros and the government, which joined forces in recent years to boost their decision-making power in Petrobras, as the oil producer is known, at the expense of minority shareholders.

[…]

While funds belong to workers in those state-run companies, their management is usually tapped among union members with strong ties to the government.

The hefty stakes that Previ, Petros and other funds in state companies have amassed in a handful of Brazilian companies for years allow them to appoint board members and key personnel.

Petros and the other two funds, known as Previ and Funcef, respectively, can appeal the CVM decision before the National Monetary Council – which is Brazil’s highest economic policy-making body.

Petros is Brazil’s second-largest pension fund.

International Organization Raises Questions About Governance, Oversight of UN Pension Fund

Last week, the Coordinating Committee of International Staff Unions and Associations (CCISUA) raised concerns to the UN General Assembly about governance problems at the UN pension fund.

The remarks were delivered by Ian Richards, President of CCISUA, a group composed of UN system staff unions and associations.

Concerns included the weakening of the methods by which pension staff can report fraud and abuses, the possible harassment of whistleblowers and other managerial issues.

The remarks from Ian Richards:

Let me end with a common system issue of great concern to us, the management of the pension fund, an item you are also considering today.

We welcome the decision of the fund’s board that it should continue to be administered by the UN Secretariat, ensuring that the necessary management controls can be maintained.

But we are concerned that the management team at the Fund is actively seeking waivers to four important elements of the staff regulations. If approved, we foresee reduced opportunities for qualified pensions experts in your countries to work at the Fund and a weakened ability of OHRM to check abuses of authority.

Firstly, management has requested exemption from the UN mobility policy as its functions are specialized. Yet, as you are aware, having passed the mobility policy in April, mobility already exempts specialized posts; this matter is moot.

Secondly, management wants discretionary authority to keep some staff beyond retirement, citing an IT project. Such discretion will remove incentives for workforce and succession planning and does not make strategic sense. The Fund’s new IT system will need to be implemented by staff who can stay on for years to come in order to manage and maintain it.

Thirdly, management wants to promote certain colleagues from the G to P categories without passing through the exam, an issue on which you may well have an opinion.

Finally, management has asked for the right to laterally assign staff in contravention of your own instructions, reiterated on many occasions, that all vacancies be advertised externally.

Distinguished delegates, all this is taking place in a UN department whose management recently issued a directive forbidding staff from reporting fraud to OIOS. We have also received reports of alleged threats against suspected whistleblowers. With $51 billion at stake, this is alarming. As Member States, ultimately responsible for the fund’s finances. I therefore trust that you will seriously examine these risks to the Fund.

The full remarks, which include a discussion of retirement age, can be read here.

They can also be seen starting at around the 31:30 mark of the following video: