Pension Funds Push G20 Leaders to Regulate and Reform With Long-Term Investing in Mind

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Pension funds and other investors participating in the Fiduciary Investors Symposium at Harvard University have written a letter to Australian Prime Minister Tony Abbott encouraging him and other G20 leaders to implement regulations and reforms that encourage long-term investing.

[The letter can be read at the bottom of this post.]

Australia is hosting the 2014 G20 summit.

From the letter:

There was a request to alert you to this support from the industry and to request action from G20 leaders on the following:

1. That we acknowledge the OECD’s definition of long-term capital in terms of being patient, engaged and productive.

2. That investor voices can play an important role in the discussion of those factors that are fundamental to the development of a sustainable financial system that delivers benefits to the economy, our societies and the planet, now and into the future.

3. That asset owners, including pension funds, sovereign funds and endowments have an interest to ensure that, in order to provide strong financial returns, and effective stewardship of assets as well as value creation, all the stakeholders in funds management need to be well informed about and active in pursuing a long term investment horizon. This requires a commitment to stronger direct engagement with companies and changes in reporting cycles and greater transparency.

4. That regulation can be enabling of long-term investment and we want to ensure that regulation does not inhibit long-term investment. We therefore encourage a deeper level of engagement between asset owners and investment managers with policy makers that relate to the evolving global financial, economic and social processes as they become more integrated and more complex and help design a regulatory framework that helps and does not hinder long-term investment.

Read the entire letter here, or below.


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CalPERS, Harvard Money Linked To Caribbean Pay Day Loan Venture

Tropical island

A unique series of events exposed this week a controversial investment made by a handful of institutional investors.

Institutional investors such as Harvard and CalPERS invested a combined $1.2 billion with a private equity fund, Vector Capital IV LP. But Vector soon tried investors’ patience, as it was slow to invest that money.

Eventually, some investors threatened to pull out altogether—which led Vector to make the quick decision to invest in Cane Bay Partners VI LLLP, a company that ran numerous pay day loan sites in the Caribbean and charged up to 600 percent interest for a loan. From Bloomberg:

By 2012, investors including Harvard University were upset that about half the money [invested with Vector] hadn’t been used, according to three people with direct knowledge of the situation.

Three Americans on the Caribbean island of St. Croix presented a solution. They had built a network of payday lending websites, using corporations set up in Belize and the Virgin Islands that obscured their involvement and circumvented U.S. usury laws, according to four former employees of their company, Cane Bay Partners VI. The sites Cane Bay runs make millions of dollars a month in small loans to desperate people, charging more than 600% interest a year, said the ex-employees, who asked not to be identified for fear of retaliation.

Mr. Slusky’s fund, Vector Capital IV, bought into Cane Bay a year and a half ago, according to three people who used to work at Vector Capital and the former Cane Bay employees. One ex-Vector employee said the private equity firm didn’t tell investors the company is in the payday lending business, for which borrowers repay loans out of their next paychecks.

Pay day loans are controversial because they charge high interest rates on loans given to people who are usually in a financial bind to begin with.

Many states in the US have banned the practice, which has forced the businesses to go online.

For now, Cane Bay Partners claims it is only a “management-consulting and analytics company”.


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