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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

Antares Bain Capital Complete Financing Solution Backs symplr Deal

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On December 10, 2018, Antares Bain Capital Complete Financing Solution provided a senior secured unitranche credit facility for Clearlake Capital Group, L.P. to acquire symplr, a healthcare governance, risk, and compliance software-as-a-service platform from Pamlico Capital and The CapStreet Group. Golub Capital provided financing for the transaction as well.

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PSP Investments Exits Antelliq

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On December 14th, Private equity firm BC Partners, Public Sector Pension Investment Board (PSP Investments), and other minority co-investors have signed a definitive agreement with Merck, known as MSD outside the United States and Canada, to sell Antelliq Corporation, a Vitré, France-based provider of digital animal identification, traceability, and monitoring solutions. Upon close, Antelliq will be a wholly owned and separately operated subsidiary within the Merck Animal Health Division. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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JPMorgan Edges Out Hamilton Lane on Florida SBA In-State Mandate

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The Florida State Board of Administration (SBA) manages a plethora of Florida state funds, including the state’s defined benefit plans. Florida’s SBA awarded a private equity portfolio mandate which targets high-technology businesses in Florida to J.P. Morgan Asset Management. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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