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Shifting Political Movements Impact US Public Pension Plans

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I enjoy researching the history of U.S. public pensions and peering voraciously through documents, minutes, and memos. What were the taboos at the time? What freaked out trustees?

Political themes have weighed into U.S. public pension investments for decades. In the 1980s, California Governor George Deukmejian lobbied for California state pensions to pull investments from companies doing business in South Africa due to the country’s policy on apartheid, while corporations like Chevron at the time rallied against investment divestment measures. Pension funds banned investments into countries such as Sudan (over Darfur incident) and Iran (still ongoing), while then embracing real estate investment into Russia into the 2010s.

1990s Gangsta Rap and Cigarettes

Then pension funds hated tobacco, some banning tobacco investments. For example, the Texas Permanent School Fund in 2007 sold its tobacco stock holdings in 1996. Tobacco still remains unpopular among policymakers, while marijuana (cannabis) opened its doors for more paths toward full legalization in the United States.

“Gangsta Rap” was a popular genre in the late 1980s among urban youth, seeping well into the 1990s and 2000s toward mainstream music culture. The vulgar lyrics, often sexually-graphic and violent toward women, shocked politicians at the time like Vice President Al Gore and his then wife Tipper. In June 1997, the state of Texas became the first state to pass a law prohibiting state agencies from investing in companies that produced music that promotes violence or degrades women. Then Texas Governor George W. Bush Jr., who eventually became a U.S. President, signed the law as a tiny rider in 1997. Time Warner, London-based EMI Group, and Joseph E. Seagram & Sons Inc. were the major recording companies getting flack from pensions. In July 1997, Maryland government officials threatened to remove state pension money from companies that produced gangsta rap. In rare bi-partisan fashion, a coalition of Democrats and Republicans were united on this issue at the time, believing that gangsta rap encouraged youth to cop killing, gang violence, and drug use. Fast-forward to 2012 and onward, when rap luminaries like Jay-Z, author of famous rap song “Big Pimpin,” and Snoop Dogg, who allegedly smoked a joint in the White House bathroom, met in the White House with President Barack Obama.

Climate Change and #metoo

The winds have changed since Al Gore’s famous documentary, “An Inconvenient Truth” won praise with political leaders in Europe and then America. Thus, a major push for climate change-related measures from public pensions to enact changes on boards, such as disclosing climate risk and outright divesting from oil and gas stocks. Global warming morphed into climate change and the campaigns of rainforest deforestation (movie: FernGully: The Last Rainforest) and ocean life preservation (movie: Free Willy) took second notice among global policymakers.

In a response to more reported U.S. shootings, gun manufacturers were examined by public pensions and investment managers. New York state pensions have taken a deeper look at for-profit listed private prisons.

And now pensions are talking about #metoo, a hashtag used on social media platforms like Twitter. #metoo became a movement in an attempt to demonstrate the widespread prevalence of sexual assault and harassment, especially in the workplace. The #metoo movement was started initially by the revelation of behaviors of Hollywood honchos like Academy Award winner Harvey Weinstein, and subsequently major media figures like Charlie Rose, Les Moonves, and Bill Cosby. After devouring a number of untouchable media figures, #metoo went after the business community and practices in the general workplace. Public pensions are at risk; many times they are indirect investors of startups and private companies through private equity fund partnerships. Some of these CEOs have been accused of sexual harassment, leaving the firm, but also exiting with their business acumen.

What’s changing now is that pensions are exerting more will onto corporate board of directors, through many channels including proxy firms. These proxy firms advise investors to invest in pre-described ways. Getting trend intelligence and doing due diligence on investments will be more important than ever. Reading news websites is not enough. What is acceptable and what pressures will be exerted on public fund retirement money in 2025?

The views in this article are expressed by Michael Maduell.
Michael Maduell is President of the SWFI.
www.swfinstitute.org

KIC to Manage a Portion of Korea Post Assets

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In late February, the Korea Investment Corporation (KIC) inked an agreement to manage some of Korea Post’s global assets. KIC also seeks to provide investment training and research to Korea Post.

“As part of effort for Korea Post to allocate part of global investment assets to KIC, both agencies agreed to discuss details during the first half of this year, including the manner in which joint investment and asset allocation will be made,” KIC said in a statement.

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Singaporean Sovereign Wealth Capital Participates in DoorDash Series F Round

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San Francisco-based DoorDash Inc., a food delivery company, raised US$ 400 million in a Series F investment round. The investment round was led by Singapore’s Temasek Holdings and San Francisco-based Dragoneer Investment Group, LLC. Post-raise, DoorDash has raised US$ 1.4 billion in equity capital. This gives DoorDash a post-money valuation of US$ 7.1 billion. DoorDash competes against publicly-traded company Grubhub, Postmates, and UberEats, a service of Uber Technologies.

Other investors in the Series F round include SoftBank Vision Fund (managed by SoftBank Group), DST Global, Coatue Management, Singapore’s GIC Private Limited, Sequoia Capital, and Y Combinator.

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CPPIB and Sterling Partners Exit Livingston International

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Canada Pension Plan Investment Board (CPPIB) and U.S. private equity firm Sterling Partners are exiting their investment in Livingston International Inc., an international trade-services firm based in Toronto, Ontario, which specializes in customs brokerage, freight forwarding, and trade consulting. Livingston International is Canada’s largest customs broker and third-largest entry filer in the United States.

U.S. private equity firm Platinum Equity is buying Livingston International from CPPIB and Sterling Partners. Platinum Equity is a private equity firm founded by Tom Gores in 1995.

Livingston International was founded in 1945 by Gerry Livingston. In 2002, the company went public after backing from CAI Capital Partners. In 2010, CPPIB and Sterling Partners acquired the company for US$ 324 million. On May 8, 2012, Livingston International acquired New Orleans, Louisiana-based M.G. Maher & Company, Inc. and MCLX, Inc. Maher is an international freight forwarder, customs broker and logistics provider. In 2013, the owners of Livingston International refinanced debt raising US$ 555 million in senior secured credit facilities.

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