Iowa receives wide interest in ‘unconventional’ alpha search

The Iowa Public Employees Retirement System (IPERS) has received wide interest in its search for active management that can show high performance regardless of the manager’s asset class or benchmark, collecting more than 700 proposals by the December due date.

The $31bn system is using the unconventional RFP to help it take a more holistic view of its public markets portfolio options and identify topperforming managers across a range of traditional asset class “silos.” IPERS is open to a wide range of investments that are primarily comprised of liquid, publicly traded securities, looking for strategies that show
“persistent risk-adjusted alphas that are uncorrelated with IPERS’ strategic asset allocation, liabilities, and the alphas of other public market products within the IPERS investment program.” It issued a request for proposals in October, with assistance from Wilshire Consulting, and proposals were due December 8.

The response has been overwhelming, according to IPERS spokeswoman Judy Akre. All 25 of IPERS’ current active public markets managers and products were automatically included in the search, Akre said. No decisions have been made yet, and IPERS has not yet set a timeline for the next stages of the search.

“There is no established timeline,” Akre told MMR. “We are still evaluating the manager responses.”

IPERS also has not set a firm target for the amount it would invest through the RFP, or the number of managers it would hire, Akre said.

Read the full story: Iowa receives wide interest in unconventional alpha search

Published by Money Management Report/Pageant Media.

NYC police pension not on board with city’s fossil fuel divestment plan

The New York City Police Pension Fund, one of the five city pension plans overseen by the Comptroller’s Office, voted down a proposal to divest the city’s pension funds from companies that own fossil fuel reserves.

Mayor Bill de Blasio and Comptroller Scott Stringer announced the divestment proposal earlier this month, saying that the $189bn New York City Pension Funds should divest from companies that own fossil fuel reserves in the next five years, becoming the first major U.S. pension plan to do so (MMR, 1/10/2018). The comptroller introduced a resolution to begin the process at the common investment meeting last week, starting with a broad request for information from experts, stakeholders, industry, and members of the public and following with a request for proposals for a consultant to study divestment and guide the pension funds’ efforts.

One of the pension funds, the $63.2bn New York City Employees Retirement System has passed the resolution thus far, and the plan also has majority support from the Teachers Retirement System and the Board of Education Retirement System, which will vote soon. But the $39.8bn New York City Police Pension Fund did not sign on to the divestment effort, with one trustee saying that he felt that the board was being pressured to go along with a plan that was formed without its input.

“I don’t know what the sudden urge to do this was,” said trustee Joseph Alejandro, representing the Patrolmen’s Benevolent Association. “I see that a lot of work was done without us being involved in the very beginning of it…. I don’t think we need another resolution with another undefined process being pushed by someone who may or may not be here four, five years from now.”

Read the full story: NYC police pension not on board with city_s fossil fuel divestment plan

Published by Money Management Report/Pageant Media.

Public pensions forced to play defense on ESG investments

As environmental, social and governance (ESG) concerns become more prominent in public pension plans’ strategies, sponsors sometimes struggle to justify their actions without the benefit of a clear consensus on how to measure ESG success. Board members, in particular, are feeling squeezed between divergent opinions on whether ESG is a core part of their fiduciary duty.

Different investors take different approaches to ESG and its role in a portfolio, and they use different metrics and frameworks to measure success, with competing frameworks being offered by the Global Reporting Initiative, the Sustainability Accounting Standards Board, UN Principals for Responsible Investment, G20’s Financial Stability Board’s Task
Force on Climate-Related Financial Disclosures (TCFD), and International Integrated Reporting Committee, among many others. The continued debate about how to approach ESG investing leaves plans sponsors vulnerable to critics who call ESG a distraction from investors’ core mission of maximizing returns.

The California Public Employees’ Retirement System (CalPERS), which devoted a portion of its January meeting to discussing ESG strategy, is often caught in the crossfires on ESG debates.

“It’s almost ‘damned if you do, damned if you don’t,’” CalPERS board member Richard Costigan said at a recent board meeting. “As a fiduciary, if I focus too much on this, I risk lower returns which opens me up to [criticism]. Now we’re talking about inaction raising the risk of a fiduciary breach. As a trustee I’m sort of stuck in the middle.”

Read the full story: Public pensions forced to play defense on ESG investments

Published by Money Management Report/Pageant Media.

San Francisco pension resists calls for fossil fuel divestment

The $24bn San Francisco Employees Retirement System (SFERS) resisted calls from activists to divest from fossil fuels, instead approving a more limited plan to identify and engage with the worst sources of greenhouse gas emissions.

SFERS held a special board meeting January 24 to consider divestment, which was supported by board member Victor Makras and opposed by the system’s investment staff and consultant NEPC. In May, Makras made a motion to divest all fossil fuel holdings in its public markets accounts within 180 days. NEPC estimated that the divestment would cover about $500m in assets, or about 4.5% of SFERS’ public equity potfolio.

Investment staff countered with a proposal that would create a separate $1bn “carbon constrained” passive account strategy that aims to reduce carbon emissions by 50% compared to the S&P 500 Index, and take a phased approach to identifying and engaging with the “worst of the worst” companies in carbon emissions. The approved plan would also hire a director of socially responsible investing and partner with other pension plans, including the California State Teachers’ Retirement System (CalSTRS), NYC Retirement Systems and the New York State Common Retirement Fund, on carbon emission reduction efforts.

SFERS board approved the investment staff’s proposal at the meeting, drawing criticism from activist groups in attendance. San Francisco’s investment team prepared a 164-page report in response to the divestment resolution, saying that divestment would not do anything to reduce fossil fuels.

“This cannot be emphasized enough: divestment does not reduce fossil fuels,” Executive Director William Coaker wrote in a 164-page report. “Staff is concerned that fossil fuels are causing global warming. However, divestment does not reduce the amount of fossil fuels; it simply changes ownership.”

Read the full story: San Francisco pension resists calls for fossil fuel divestment

Published by Money Management Report/Pageant Media.