Month / March 2018

by dietrichknauth

NY Common Fund will vote against all-male boards

The $209bn New York State Common Retirement Fund plans to vote against all board directors at companies without a single woman on their boards, according to State Comptroller Thomas DiNapoli.

The Comptroller’s office also announced agreements with four companies that agreed to formally include gender and racial diversity in their considerations of board candidates after engagement with the Common Retirement Fund. DiNapoli commended Bristol-Meyers Squibb, Leucadia National, Packaging Corp. of America and PulteGroup for their actions, saying that the Common Retirement Fund had withdrawn shareholder
proposals it had filed at the companies. While the retirement fund will continue to pressure companies to diversify their boards, its board votes will give additional force to those efforts, DiNapoli said.

“It is unconscionable that hundreds of publicly-held U.S. companies have no women directors,” DiNapoli said in a prepared statement. “We’re putting all-male boardrooms on notice – diversify your boards to improve your performance.”

Read the full story: NY Common will vote against all-male boards

Published by Money Management Report/Pageant Media.

by dietrichknauth

CalPERS blocks gun divestment proposal

The $335bn California Public Employees Retirement System rejected a proposal to begin divestment from retailers and wholesalers of firearms that are illegal in California but legal in other states.

The proposal, from California State Treasurer and CalPERS board member John Chiang, would have gone a step further than CalPERS’ previous divestment from manufacturers of military-style assault weapons. Many public commenters, including victims of mass shootings in San Bernardino and Las Vegas, spoke in support of the measure, and some opposed it.

Board members debated whether divestment was a more effective tactic than engagement with retailers and wholesalers, some of whom have already made moves to remove such weapons from their stores. Board member Theresa Taylor said she wasn’t sure if divestment was the best option, and said she’d prefer to stick the planned schedule rather than voting in April.

“We have a divestment policy that states that we generally don’t divest,” Taylor said. “If we are divesting, we lose our seat at the table. We wouldn’t have been able to get Dick’s or Walmart or the other companies to engage with us if we no longer own those stocks.”

Read the full story: CalPERS blocks gun divestment proposal

Published by Money Management Report/ Pageant Media.

by dietrichknauth

SASB feeds institutional hunger for sustainability data

The founder of the Sustainability Accounting Standards Board (SASB), a nonprofit established in 2011 to develop sustainability accounting standards, told institutional investors that she remains laser-focused on creating better metrics for financially material sustainability concerns, despite investors’ hunger for data on ESG topics outside of that strict mission.

Jean Rogers, SASB’s chair and founder, spoke at the Council of Institutional Investors’ (CII) spring conference on Tuesday, Μarch 13, saying that companies’ current reporting on sustainability risks currently leaves a lot to be desired, as few use data and most rely on “boilerplate” risk disclosures. SASB plans to finalize and publish industry-specific
sustainability reporting standards for 79 industries later this year, and hopes that those standards will help investors better understand the financial risks related to a particular company or industry.

“Good investors try to look at material risks, but are hampered in the sustainability space by a lack of high-quality comparable data on financially material issues,” Rogers said. “We look for evidence that these sustainability issues are likely to affect financial or operating performance of a company or industry, so that investors have adequate information on those risks and can use that information accordingly.”

While companies are already addressing sustainability risks in their disclosures to investors, they are not specific enough to be useful for investors, Rogers said. Without better data, investors can’t put price on sustainability risks or differentiate between which companies are performing well and which companies are performing poorly, she added.

Read the full story: SASB feeds institutional hunger for sustainability data

Published by Money Management Report/Pageant Media.

 

by dietrichknauth

NYC urges smaller pension funds to follow its lead on ESG in real estate

Trustees for the New York City Pension Funds urged institutional investors around the country to take up policies that pressure real estate and infrastructure managers to pay more attention to ESG concerns like worker safety, wages and benefits, in a discussion at the Council of Institutional Investors’ spring conference in Washington, D.C., on March 12.

The city’s five pension funds, which collectively manage $193.5bn in assets, adopted responsible contractor policies (RCP) in May and June of 2017, and trustee representatives Susannah Vickers and David Katzman said that the policies provide a good pressure point for engaging managers on environmental, social and governance concerns.

Vickers, who is the Executive Director for Pensions at NYC’s Bureau of Asset Management, as well as the NYC Comptroller’s representative on four of the five pension boards, said that the city has invested in six or seven real estate projects since the policies went into effect. None of the managers had any problems agreeing to the city’s wage, safety, and benefits policies, she said.

“Many of the big managers are relying more and more on institutional investors to raise these huge funds, to do the mega deals that they’re doing in private real estate, private infrastructure, private equity,” Vickers said. “They really need us as clients, and I think it’s harder for them to put the deals together that they want to do and be the big players that they want to be without institutional dollars. So when we create a policy, they sort of have to listen.”

Read the full story: NYC urges smaller funds to follow its lead on ESG in real estate

Published by Money Management Report/Pageant Media.

by dietrichknauth

SEC chair not eager to take action on unequal stock schemes, IPO arbitration

The chair of the Securities and Exchange Commission expressed reluctance to take additional action on dual-class stock structures and arbitration clauses in companies’ initial public offerings.

Jay Clayton, speaking at the Council of Institutional Investors’ spring conference in Washington, D.C. on March 12, said that his agency has limited resources, and that he was hesitant to commit to game-changing actions on topics of interest to the institutional investors in attendance.

One topic which has discussed frequently at the conference was dual-class capitalization structures, in which some classes of stock carry more voting weight than others. The issue has been more hotly debated by investors since the 2017 IPO of Snap, the maker of SnapChat, which sold shares of common stock that conferred no voting rights at all. SEC commissioner Robert Jackson, Jr. said in February that such structures were undemocratic, and called for listing standards addressing the use of perpetual dual-class stock that can be passed down to heirs without any diminishing of voting power. Clayton, however, was more circumspect when asked about dual-class shares at the CII event.

“I’m not putting this at the front of the agenda for something we should weigh in on,” Clayton said.

Clayton said that the “one share, one vote” model is not the only model of governance for successful public companies, although extreme examples like Snap were cause for concern.

“Where you draw the lines, and whether that’s something that should be done by the SEC or by the stock exchanges or some other authority – or by people with a great deal of capital to put to work in the markets – is a question worthy of debate,” Clayton said. “But from my own perspective, I’m not an absolutist on either end.”

Read the full story: SEC chair not eager to take action on unequal stock schemes, IPO arbitration

Published by Money Management Report/Pageant Media.

by dietrichknauth

Turmoil in LACERS’ board

Pension boards have an important duty to oversee the investment apparatus that ensure that retirees will be paid their promised benefits — but what happens if a board member goes too far, becoming more attack dog than watch dog?

That was an accusation recently leveled at a public meeting of the Los Angeles City Employees’ Retirement System (LACERS), when the $17bn fund’s recently-retired general manager spoke up to protest what he saw as “breakdowns in board decorum” that were interfering with the plan’s ability to recruit and retain the staff and consultants needed to meet the city’s investment goals.

Pension trustees face a difficult task in striking the right oversight balance — often working part-time to oversee investment staff that are making day-today decisions in a complicated industry where trustees often have little direct expertise. Education, training, and relationship management are all important tools in such a context, allowing board members to ask productive questions without being either needlessly antagonistic nor a rubber stamp for investment staff, according to Matrice Ellis-Kirk, a managing director at RSR Partners. Ellis-Kirk has offered governance consulting and recruiting services to the boards of pension plans, investment managers, and public and private companies.

“You’re not looking to have a monolith,” Ellis-Kirk told MMR. “The most important part of a board is having diversity of thought. What you’re trying to do is create an environment where you can get honest information, get transparency, and hold people accountable without making them want to run or hide. Hostile environments do not create that.”

Read the full story: Turmoil in LACERS_ board

Published by Money Management Report/Pageant Media.

by dietrichknauth

Montana moves cautiously on diversifying strategies

The Montana Board of Investments is proceeding slowly with a new allocation to diversifying strategies, moving forward only after a close board vote and a cautious initial allocation of 0-4% of the overall portfolio.

The board updated its asset allocation targets for the $11.3bn Consolidated Asset Pension Pool in November, including a brand-new target for diversifying strategies. The asset class includes a potentially wide mix of public markets investments that seek to provide downside protection while maintaining liquidity and providing a better return than
just holding onto cash.

Creating a new asset class was necessary, according to CIO Joe Cullen, to allow the state pension funds to take advantage of multi-asset strategies and other investments that otherwise would not fit within the state’s asset allocation structure.

“There’s no place for them in our current portfolio,” Cullen said at the fund’s February meeting. “The opportunity set for diversifying strategies is larger than what we collectively utilize across the other asset classes.”

Read the full story: Montana moves cautiously on diversifying strategies

Published by Money Management Report/Pageant Media.

by dietrichknauth

Montana is exploring performance-based fee models

The $16.4bn Montana Board of Investments is considering the introduction of performance-based fees for its active managers, weighing the risks and costs related to paying asset managers on a sliding scale based on how they measure up to their benchmark.

Currently all of the state’s equity managers are paid under a fixed fee schedule, and the state investment board has not definitively decided to change that, according to Montana’s Director of Public Market Investments, Rande Muffick. The state’s investment staff has begun exploring a range of options for different fee structures, and has a “heightened interest” in performance-based fees, Muffick said at the board’s February meeting.

“It isn’t really a change yet, it’s more of a change in mindset than anything,” Muffick told the board. “The idea of performance-based fees doesn’t match as well in some types of portfolios as others , but given what’s going on in the industry and the underperformance, largely, of active managers as a whole, we have a heightened interest in looking at performance-based fees, more so than we have in the past.”

Read the full story: Montana is exploring performance-based fee models

Published by Money Management Report/Pageant Media.