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The Case For Long-Termism in Pension Investments

Pension funds, more so than other investors, operate on a particularly long time horizon.

But that doesn’t mean funds can’t succumb to short-term thinking.

Keith Ambachtsheer, Director Emeritus of the International Centre for Pension Management at the University of Toronto, makes the case for more long-term thinking at pension funds in a recent paper published in the Rotman International Journal of Pension Management.

He lays the groundwork of short-term thinking at pension funds by presenting this statistic:

My 2011 survey of 37 major pension funds found that only 8 (22%) based performance-related compensation on measures over four years or more.

In other words, pension funds aren’t rewarding long-term thinking. But how can that be changed? From the paper:

A good start is to insist that the representatives of asset owners become true fiduciaries, legally required to act in the sole best interest of the people (e.g., shareholders, pension beneficiaries) to whom they owe a fiduciary duty….the resulting message for the governing boards of pension and other long-horizon investment organizations (e.g., endowments) is that they must stretch out the time horizon in which they frame their duties, as well as recognizing the interconnected impact of their decisions on multiple constituents to whom they owe loyalty (e.g., not just current pension beneficiaries but also future ones).

Increasingly, fiduciary behavior and decisions will be judged not by a cookie-cutter off-the-shelf “prudent person” standard by a much broader “reasonable expectations” standard.

A logical implication of these developments is that the individual and collective actions of the world’s leading pension funds are our best hope to transform investing into more functional, wealth-creating processes.

It will take work, but a shift to long-termism will be worth it, according to the paper:

Institutional investors around the globe, led by the pension fund sector, are well placed to play a “lead wagon” fiduciary role as we set out to address these challenges. Indeed, the emerging view is that pension sector leaders have a legal obligation to look beyond tomorrow, and to focus the capital at their disposal on the long term.

Will the effort be worth it? Logic and history tell us that the answer is “yes.” Qualitatively, long-termism naturally fosters good citizenship; quantitatively, a 2011 study that calculates the combined impact of plugging the upstream and downstream “leakages” in conventional investment decision making with a short-term focus found that the resulting shift to long-termism could be worth as much as 150 basis points (1.5%) per annum in increased investment returns (Ambachtsheer, Fuller, and Hindocha 2013).

Read the entire paper, titled The Case for Long-Termism, here [subscription required].

Pension Funds React, Weigh Next Move After Bond Guru’s Departure From PIMCO

Bill Gross, bond guru and co-founder of investment management firm PIMCO, has left the company. Gross’ is only the latest in a string of high-level departures from the firm.

Some wealth managers had exited PIMCO earlier this year after sensing that the “team was falling apart.”

But how are pension funds reacting?

Here’s CalPERS’ take, from Bloomberg:

The California Public Employees Retirement System, the largest U.S. pension, said it doesn’t have plans to change its investments with Pimco, according to an e-mailed statement today.

“Calpers has respect for both Bill Gross and Pimco investment professionals,” the pension system said. Calpers, which has about 1.5 percent, or $1 billion, of its fixed-income assets in a Pimco international bond fund.

New Mexico PERS isn’t ready to make any decisions, either. But the Florida SBA, the entity that manages investments for the state’s pension funds, is watching PIMCO closely. Bloomberg reports:

Jon Grabel, chief investment officer of the Public Employees Retirement Association of New Mexico, said it’s too early to make a decision about moving assets. Pimco manages about $725 million for the association in a separate account, Grabel said.

“One person may get the headlines, but one person doesn’t manage trillions of dollars,” he said.

The Florida State Board of Administration, which manages $147 billion in its Florida Retirement System Pension Plan, has been monitoring Pimco since El-Erian left. The fund has $1.9 billion invested in Pimco and nothing in Janus, said Dennis MacKee, a spokesman for the pension.

Pimco is on the system’s watch list, which isn’t a precursor to redemption, MacKee said. It means the board is looking closely at the funds’ performance and operations and will meet with consultants and investment staff to decide what to do, he said.

New York’s Common Fund and Indiana PERS are taking a similar approach: they’ve not yet moved on from PIMCO, but have placed the firm on a ‘watch list’, reports Bloomberg:

New York City’s five pension funds are evaluating the situation at Pimco, the New York City Office of the Comptroller said in an e-mailed statement. Total assets of the funds for firefighters, police officers, teachers, school administrators and civil servants is about $160.5 billion.

The $30.2 billion Indiana Public Retirement System said Pimco remains on its watch list and it’s monitoring developments, Jennifer Dunlap, a spokeswoman for the pension fund, said in an e-mailed statement. The retirement plan had put Pimco on its list in January.

Gross left PIMCO to take a job at Janus Capital Group Inc.

Gross said he wanted to take a job that allowed him to get closer to his original passion: trading bonds.

Would You Sell Your Future Pension For a Lump Sum of Cash? These Businesses Are Banking On It

You’ve heard of payday advances. But pension advances?

Believe it or not, businesses are popping up that allow retirees to do just that: “sell” a portion (or all) of their future retirement income in exchange for a lump sum of cash today.

The owners of these businesses admit that their service isn’t for everyone. But if you need to pay bills now, they say, then why not sell a portion of your pension for cash? More from Today:

Their pitch, aimed at military and government retirees with generous pension benefits and those with bad credit, is mighty appealing: cash now to pay today’s bills.

Of course, to get tomorrow’s money today, you have to sign over your future pension payments for a specified number of years.

Mark Corbett runs the website Buy Your Pension, which helps facilitate pension sales. He told TODAY that a pension advance is not for everyone, but he believes it can be beneficial for some people.

“You should not sell your pension unless it saves you money,” he said. “For example, you are using it to pay off bills.”

Four years ago, Corbett got an advance on his private pension — selling a $237,000 nest egg for $89,000 — to pay off his mounting bills. He called it “a godsend” that reduced his stress and probably added years to his life.

But critics say pension advance services are dangerous and financially unwise. The Federal Trade Commission, Financial Industry Regulatory Authority and other consumer protection agencies are already cautioning people to be know the implications of selling your pension. Today writes:

“There are serious financial consequences down the road for taking the money in a lump sum now,” said Gerri Walsh, FINRA’s senior vice president of investor education. “You are getting less money than if you waited and got those monthly pension payments.”

Unlike a traditional loan, you can’t get out of the deal early. If you signed up for a six-year payout, the company gets your pension for a full six years.

“A pension advance is unlike any other type of financing, because you’re required to sign over part of your future income stream,” said Leah Frazier, an attorney for the FTC.

“You could find yourself in a situation down the road where you need money for your basic expenses, but you don’t have it because you took it as an advance.”

And remember: Getting a lump sum pension payment is likely to have some serious tax implications.

“It could push you into a higher tax bracket,” said Lisa Greene-Lewis, lead CPA at TurboTax. “I could see people doing this and getting shocked by the additional taxes they now have to pay.”

The Government Accountability Office (GOA) recently did some secret shopping at nearly 40 pension advance businesses. Based on their experiences, they released a report indicating that they’d found numerous “questionable business practices”.

Last month, Missouri banned pension advances for public employees. They are the only state thus far to do so.

Photo by: www.SeniorLiving.Org

Is the Retirement Savings Crisis Too “Hyped”? These Researchers Think So.

A seemingly routine Capitol Hill hearing got very interesting very fast late last month. The hearing was held by the Ways and Means Social Security Subcommittee and focused on the state of retirement savings in the U.S.

Why was it so interesting? Two of the witnesses, Sylvester J. Schieber and Andrew G. Biggs, insisted that the retirement savings “crisis” in the U.S. is over-hyped. (They were referencing, among other things, the recent government statistics claiming that 20 percent of Americans aged 55-64 had zero retirement savings).

An outpouring of criticism followed, led by Christian Weller, who wrote:

Launched by Chairman Sam Johnson (R-TX), the hearing announcement made reference to retirement income being underreported, implying that families are better off than the data show. Moreover, the witness list included crisis deniers, such as the American Enterprise Institute’s Andrew Biggs, making claims that the number of households inadequately prepared for retirement is largely overstated. Some testimony turned to calls for Social Security benefit cuts. Because, after all, cutting Social Security would theoretically inflict little harm if families are already well prepared for retirement. In reality, families would suffer tremendously from Social Security cuts. Why? Because as a long-standing body of economic research has repeatedly shown, there is indeed a growing crisis.

Schieber and Biggs (who, by the way, are no slouches–you can read their bios at the bottom of this post) quickly took to the blogosphere to explain their position.

First, they tackled why they disputed the government data, released last week, that suggested one in five Americans nearing retirement had no money at all saved for retirement. From Sheiber and Biggs (S + B):

These [Social Security Administration] publications rely on data from the Current Population Survey, which omits the vast majority of income that seniors receive from IRA and 401(k) accounts and thus makes seniors appear significantly poorer and less prepared for retirement than they actually are.

IRS tax data, which include all forms of pension withdrawals, show that true incomes for middle class retirees receiving Social Security benefits are substantially higher than is believed. The fact that these faulty SSA statistics were cited by the Social Security Subcommittee’s ranking member, apparently without knowledge of the limitations of these data, is evidence that even policymakers’ understanding of retirement security can be improved.

What about National Retirement Research Index’s findings that 6 in 10 Americans are at risk of an insecure retirement? S + B write:

With due respect to the NRRI’s authors, we have already detailed how the NRRI sets a higher bar for retirement income adequacy than most financial advisors and how it ignores the ways that family size and structure play into retirement saving patterns. In addition, the NRRI projects current workers’ future incomes using a one-size-fits-all pattern that ignores the dispersion in earnings that takes place from middle age onward.

This assumption erroneously reduces the “replacement rates” that low earners will receive from Social Security. The NRRI also predicts that traditional defined benefit pension plans will continue to contract, but assumes that future retirees will have no larger IRA or 401(k)s accumulations than those of people who retired prior to 2010. Together, these factors substantially – but erroneously, in our view – increase the share of workers considered to be “at risk” of an insecure retirement.

So who are these people anyway?

Sylvester J. Schieber:

Sylvester J. Schieber is Chairman of the Social Security Advisory Board (SSAB) and a private consultant on retirement and health issues. He retired from Watson Wyatt Worldwide in September 2006 where had served as Vice President/U.S. Director of Benefit Consulting and Director of Research and Information. He holds a Ph.D. in economics from the University of Notre Dame in 1974. He has served on the Board of Directors of the Pension Research Council at the Wharton School, University of Pennsylvania since 1985. Dr. Schieber was a member of the 1994-1996 Social Security Advisory Council. In January 1998 he was appointed to a six-year term on the Social Security Advisory Board.

Andrew Biggs:

Andrew G. Biggs is a resident scholar at the American Enterprise Institute (AEI), where he studies Social Security reform, state and local government pensions, and public sector pay and benefits.

Before joining AEI, Biggs was the principal deputy commissioner of the Social Security Administration (SSA), where he oversaw SSA’s policy research efforts. In 2005, as an associate director of the White House National Economic Council, he worked on Social Security reform. In 2001, he joined the staff of the President’s Commission to Strengthen Social Security.

You can read their entire blog post here.

You can also read the initial blog post, “Yes, There Is A Retirement Crisis”.

It’s a fascinating discussion, although at this moment, it seems to be two men standing alone against a world of data.

Federal Reserve: One In Five People Nearing Retirement Have No Retirement Savings

The Federal Reserve released its Report on the Economic Well-Being of U.S. Households last week, and one statistic stood out starkly from the rest: 19 percent of people between the ages of 55 and 64 have no retirement savings and don’t have a pension lined up.

The Federal Reserve surveyed 4,100 people last year and retirement savings were one of the major topics. The report shed light on the dire state of retirement savings in the United States.

Across all age groups, 31 percent said they had zero retirement savings. When asked how they planned to get by after retirement, 45 percent said they would have to rely on social security. Eighteen percent plan to get a part-time job during “retirement”, and 25 percent of respondents said they “don’t know” how they will pay the bills during retirement.

Screen shot 2014-08-11 at 11.23.21 AM — Source: The Federal Reserve

Pension360 has previously covered how income inequality rears its head when retirement approaches, and this report provided further evidence: 54% of people with incomes under $25,000 reported having zero retirement savings and no pension. Meanwhile, only 90% of those earning $100,000 or more had either retirement savings or a pension, or both.

As 24/7 Wall St. points out, these trends could have a broader affect on the economy. What’s certain, however, is that retirement is no longer a certainty for many people:

This is no simple report to ignore, and this can affect the future of many things in America. It can affect Social Security, it can affect the financial markets via contributions and withdrawals of retirement funds, and it can affect the future workforce demographics in that older workers may simply not be removing themselves from the workforce, making it impossible for younger workers to graduate or move up.

Another retirement scare is a tale you have heard, but this quantifies it. The Fed showed that although the long-term shift from defined-benefit to defined-contribution (from pension to 401(K) and IRA) plans places significant responsibilities on individuals to plan for their own retirement, only about one-fourth appear to be actively doing so.

The researched that conducted the survey noted that the lack of retirement savings is due partially to poor planning. But many of those surveyed said they “simply have few or no financial resources available for retirement”.

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Survey: Pensions Funds Will Continue To Increase Alternative Investments

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Often, media narratives don’t properly reflect the reality of a situation.

For example, news has been breaking over the past few weeks of pension funds decreasing their exposure to hedge funds and alternatives. That includes CalPERS, who plan to chop their hedge fund investments dramatically. The reason: high fees associated with those investments are eating into returns.

But according to a new report, pension funds are planning to increase their allocations toward alternatives, more than any other asset class, for years to come.

Consulting firm McKinsey & Co. surveyed 300 institutional investors about their future plans investing in alternatives. (McKinsey defines “alternatives” as hedge funds, funds of funds, private-equity funds, real estate, commodities and infrastructure investments.)

As for the question of whether funds will continue to invest in alternatives, the answer was a resounding yes: the respondents indicated they would like to increase their exposure to alternatives by 5 percent annually.

The reportnotes that pension funds believe their traditional investments, which have been garnering great returns as the bull market saunters on, run the risk of not meeting actuarial return assumptions in the medium-term, or when the market comes down off its high. At that point, pension funds want to be invested in higher-yielding instruments to meet return assumptions. From CFO Magazine:

McKinsey suggests that the bull market, now more than five years old, can’t be expected to continue indefinitely. Indeed, the report says institutional investors that manage money for pension plans are moving more money into alternatives out of “desperation.”

“With many defined-benefit pension plans assuming, for actuarial and financial reporting purposes, rates of return in the range of 7 to 8% — well above actual return expectations for a typical portfolio of traditional equity and fixed-income assets — plan sponsors are being forced to place their faith in higher-yielding alternatives,” McKinsey writes.

But, the consulting firm notes, the rapid growth of alternatives is not simply the result of investors chasing high returns. “Gone are the days when the primary attraction of hedge funds was the prospect of high-octane performance, often achieved through concentrated, high-stakes investments. Shaken by the global financial crisis and the extended period of market volatility and macroeconomic uncertainty that followed, investors are now seeking consistent, risk-adjusted returns that are uncorrelated to the market.”

The Los Angeles Fire and Police Pensions fund is at least one fund going against the grain here: it recently took 100 percent of its money out of hedge fund investments.

CalPERS Rescinds $700 Million Investment With Private Equity Fund Headed By Doctor With No Private Equity Experience

You probably trust your doctor with your life. But with your money? Many people might balk at the notion of their doctor making their investment decisions for them.

But back in 2007, CalPERS made a big bet: a $705 million investment in a private equity fund, Health Evolution Partners Inc., specializing in health care companies.

The CEO of the fund, David Brailer, is a nationally renowned physician who had previously been the “health czar” under George W. Bush. But this was his first foray into the investment space, and he had no experience running an investment fund or making private equity investments.

Still, he reportedly promised the CalPERS board healthy returns in excess of 20 percent.

But through seven years, the fund has never managed to exceed single-digit returns. And portions of CalPERS’ investment have actually experienced negative returns.

That has led CalPERS to cut ties with the fund, according to Pensions & Investments:

CalPERS is ending its unique experiment as the sole limited partner of Health Evolution Partners Inc., a private equity firm that focuses on health-care companies.

…

CalPERS data show the HEP Growth Fund had an internal rate of return of 6.5% from its inception in mid-2009 through Dec. 31, 2013. By contrast, the $5.3 billion growth fund portion of CalPERS’ private equity portfolio returned 12.72% for the five years ended Dec. 31, the closest comparison that could be made with the data the pension fund made available.

The HEP fund of funds has had more serious performance problems. Its IRR from inception in 2007 through Dec. 31, 2013 was -5.2%, show CalPERS statistics. CalPERS also wants out of that investment, but sources say a complicated fund-of-fund structure may make that difficult.

Mr. Desrochers would not comment on HEP, telling a Pensions & Investments reporter the matter was too sensitive to discuss.

CalPERS spokesman Joe DeAnda, in an e-mail, said, “We continue to evaluate all options relating to Health Evolution Partners.”

Mr. Brailer did not return several phone calls.

CalPERS paid the fund over $18 million in fees in the fiscal year 2011-12, according to the System’s financial report.

Meanwhile, CalPERS is gearing up for another large investment partnership, to the tune of $500 million, that will focus on infrastructure investments. FTSE Global Markets reports:

The California Public Employees’ Retirement System (CalPERS) today announced a new $500m global infrastructure partnership with UBS Global Asset Management.

CalPERS, the largest public pension fund in the US, will contribute $485m to the newly formed company, while UBS will contribute $15m and act as managing member.

The partnership will operate as Golden State Matterhorn, LLC and is set to pursue infrastructure investment opportunities in the US and global developed markets.

“UBS brings extensive experience and a proven track record in global infrastructure investing that makes them a great fit for this partnership,” says Ted Eliopoulos, CalPERS Interim Chief Investment Officer. “We’re excited to work with them as we identify and acquire core assets that will provide the best risk-adjusted returns for our portfolio.”

The CalPERS Infrastructure Program seeks to provide stable, risk-adjusted returns to the total fund by investing in public and private infrastructure, primarily within the transportation, power, energy, and water sectors.

Infrastructure investments returned 22.8% during the 2013-14 fiscal year and 23.3% over the past five years, outperforming the benchmark by 17.23 and 16.6 percentage points, respectively.

CalPERS holds about $1.8 billion in infrastructure assets.

Photo by hobvias sudoneighm via Flickr CC License

Divesting From Gun Manufacturers Is Still On The Minds of Some Large Pension Funds

The politics of guns isn’t a topic too often broached at shareholder meetings.

But that’s exactly the topic that was the center of attention at Alliant Techsystems’ annual shareholder meeting on July 30, which included a shareholder resolution asking the Virginia-based defense and sporting goods company to comply with some of the Sandy Hook Principles—an initiative requesting that firearms manufacturers comply by certain guidelines, for example, developing better safety technology.

The message of the Sandy Hook Principles: comply or be sold.

And who filed that shareholder resolution? The Connecticut Retirement Plans and Trust Funds as well as the New York State Common Retirement Fund.

According to a press release, the resolution asked for the following from Alliant Techsystems:

* Promoting restrictions on firearms and ammunition sales, transfers and possession to keep guns out of the hands of children, persons with mental illness or mental health challenges, criminals, domestic or international terrorists and anyone else prohibited from possessing them under federal law;

* Supporting the establishment of a federal universal background check system for every sale or transfer of guns or ammunition conducted by the company;

* Reevaluating policies regarding the sale, production, design or conversion of military style assault weapons for use by civilians, including the distribution of any materials/information that may be used to assist in such conversions;

* Taking steps to promote the conducting of background checks for every sale or transfer of guns or ammunition by business clients, including gun show operators or gun dealers.

* Supporting a federal gun trafficking statute to ensure stronger punishment for individuals engaging in the trade of selling firearms to anyone prohibited from possessing them under federal law; and

* Promoting gun safety education at the point of sale and in the communities in which the company conducts business operations.

It’s only the latest in a string of “social Investment” decisions that imply institutional investors are considering divesting from gun manufacturers.

In February, a professor convinced his institution, Occidental College, to pass a resolution banning firearm investments by the school. It was the first college in the United States to do so.

A Pennsylvania volunteer group called Delco United is attempting to convince various municipalities to divest from guns, and in at least one case it worked: after a visit from Delco, the Pennsylvania State Association of Boroughs subsequently sold its holdings in Sturm, Ruger & Co.

Last year, CalPERS voted to sell about $5 million worth of securities related to gun manufacturers. CalSTRS, and others, followed suit. From Governing:

The $154-billion California State Teachers’ Retirement System, the country’s second largest government retirement plan, took a similar action.

CalSTRS and CalPERS took up the divestment issue at the request of state Treasurer Bill Lockyer, a member of both boards. Lockyer called the vote “largely symbolic” but stressed that it’s an important way to spur incremental change.

“We’re limited by the constraints of our responsibility and the rules that CalPERS has,” said Lockyer. “There’s only one way that we speak and that’s with money.

Funds in Chicago, New York state, New York City, Connecticut, Rhode Island and Massachusetts have publicly said they are exploring such divestments.

The Philadelphia Board of Pensions threatened to divest its $15.3 million share in various gun manufacturers if they didn’t sign on to the Sandy Hook Principles.

Chicago mayor Rahm Emanuel ordered the city’s funds to divest from firearms manufacturers, but only one fund complied.

But when it comes to social investing, is the probability of making a change worth the chance of “fiscal peril” posed by potentially higher administrative costs and lower returns associated with divesting? One prominent retirement researcher thinks not. From Governing:

Alicia Munnell, director of the Center for Retirement Research at Boston College, is an outspoken critic of social investing. After years of social investment decisions in regard to South Africa, the Sudan and other countries and causes, Munnell sees fiscal peril in forcing portfolio managers to add non-monetary considerations to investment decisions. “Introducing another dimension creates a risk that portfolio managers will take their eyes off the prize of maximum returns and undermine investment performance.”

As she sees it, the people making the social investment decisions are not the people who will bear the burden if anything goes wrong. “If divestiture produces losses either through higher administrative costs or lower returns,” she says, “tomorrow’s taxpayers will have to ante up or future retirees will receive lower benefits.”

Private pension plans, which are governed by the Employee Retirement Income Security Act, are prohibited from social investing. Munnell believes public plans should follow suit. Not that there isn’t room for other groups to do social investing. “If rich people want to adjust their own portfolios, that is perfectly reasonable,” she says. “But for public plans to do it is not.”

Social investment advocates argue they have a moral responsibility to society. As Chicago Alderman Will Burns put it earlier this year, “The damage caused by these weapons is far greater than any return on investment.”

It’s a strong argument, and one that Munnell says makes her position “not a pleasant one.” When the genocides in Darfur were occurring and pension plans were talking of disinvesting, Munnell disagreed vocally with that policy. “I sounded pro-genocide. Now I sound anti-gun control. I’m neither. I just don’t think social investing is effective. It can harm the performance of public plans.”

Connecticut Treasurer Denise Nappier has a different view.

“These companies will enhance their long-term shareholder value if they are seen as a reasonable public voice in the debate over the proper response to the Newtown tragedy”, said the Treasurer in a statement to Institutional Investor. “At the same time, they will suffer if the public perceives them as unwilling to consider reasonable voluntary measures, such as the Sandy Hook principles.”

Photo by Mitch Barrie via Flickr CC License

Private Equity Sets Sights on 401(k)s

Private equity funds have been a staple of the investments of defined-benefit plans for decades. But as the prominence of defined-benefit plans diminish and defined-contribution plans rise in their place, private equity firms now have their eyes on another prize: 401(k)s.

So said several major private equity players who spoke as part of a panel discussion at the Fifth Annual Innovative Alternative Investment Strategies Conference on Thursday.

From Financial Advisor magazine:

[Red Rocks Capital co-founder Mark] Sunderhuse sees big opportunity for private equity in the defined contribution space. “Target-date plans will use private equity,” he said. “There’s a lot of work with consultants going on, and different types of products will fit different boxes. We’ve had conversations with a number of people in more mainstream mutual fund-type formats where they’ll use it [the Red Rocks fund]. Our product is primarily used in investment models where people want private equity exposure in way where they can manage the risk and be able to reallocate it and rebalance it.”

Kevin Albert, a partner at Pantheon, a global private equity investment company, said U.S. public pension plans on average have 10 percent of their assets in private equity. But defined benefit pension plans are becoming dinosaurs both in the U.S. and abroad.

“That has motivated the best firms in the private equity industry to raise capital from other sources, and the two biggest other sources are defined contribution plans and private affluent investors,” Albert said. “And that’s a good thing because 15 years ago it was hard to convince a top 10 private equity fund to raise a feeder fund or to participate in an offering that would go to individual investors. They saw it as less prestigious, and viewed it as more complicated from a regulatory perspective.

“Now you’re seeing firms like Carlyle, KKR and Blackstone at the vanguard of this,” he continued. “So I think we’re in the middle of an amazing revolution in the repackaging of private equity to make it attractive to defined contribution plans, which have different needs and desires than defined benefit plans did. So I think that will be a meaningful difference in this industry from five, 10, 15 years ago.”

The discussion came up when the panelists were asked to explain a few key trends they see playing out in private equity in the next five years.

Photo by 401kcalculator.org

Nevada PERS to Release Member Data After Years-Long Legal Fight

A three-year legal battle concluded this week when the Nevada Public Employment Retirement System (NVPERS) agreed to release extensive data on its members, including benefits, in compliance with a state Supreme Court order from April.

The data to be released, according to a NVPERS notice (also embedded at the bottom of this post):

-Date of hire

-Date of termination

-Date of retirement

-Retirement option

-Employer name

-Contributions to system

-Service credit

-Beneficiary information

-Gross benefit amount

-Base retirement amount

-Adjustments to base

-Post retirement increase amount

-Retirement stop date and reason

-Marital status

-Fund status

-Gender

The court order forces a stark change in policy for a retirement system that had kept a notoriously tight grasp on its member and retiree records since the 1970s.

But a state Supreme Court order—an order issued last December but not clarified until this month—made it clear that, while individual retiree records will remain confidential, any reports based on that data produced by NVPERS are not confidential. In the words of the court:

Where information is contained in a medium separate from the individuals’ files, including in administrative reports generate from data contained in individuals’ files, such reports or other media is not confidential merely because the same information is also contained in individuals’ files.

That means NVPERS now must turn over what it calls its “actuarial feed”, or the detailed reports—containing substantial amounts of member data—it gives to its actuarial consultants. The consultants use the data to determine benefits and make projections.

More on the “actuarial feed” from WatchdogWire:

The agency described the “actuarial data feed,” which now is to be made public, as “an extensive report always thought to be confidential between the System and our actuarial consultant protected through a confidentiality agreement which has now been determined in part to be public information.”

Geoffrey Lawrence, director of research and legislative affairs at the Nevada Policy Research Institute, said the data-feed information is vital if researchers are “to build a clear understanding about how public pension liabilities have accrued in Nevada.

…

Under Nevada public records law, personal information remains confidential. Thus, PERS emphasized, it “will NOT release any Social Security numbers, contact information (addresses, phone numbers, or email addresses), bank information, or minor child information.”

This legal fight began in 2011, when the Reno Gazette-Journal filed a public records request asking NVPERS to release data on its members, including benefit payments and work history.

NVPERS denied that request, a move consistent with the System’s long-standing interpretation of the Nevada Public Records Act—the interpretation being that all individual member and retiree records are confidential.

The Gazette-Journal subsequently filed a petition to bring the case in front of a District Court. The court eventually ruled that NVPERS did indeed have to turn over the names of its retirees and the benefits they receive, among other data.

NVPERS appealed that decision all the way to the state Supreme Court, which issued its ruling in December. But NVPERS requested another hearing, held in April, to have the court clarify exactly what records it wanted NVPERS to disclose.

The results of that hearing were released just this month.

The data to be released by NVPERS can eventually be found on Transparent Nevada.

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