CALSTRS Reviews Cerberus Gun Related Investments

The California State Teachers Retirement System (CALSTRS), made the headlines after the pension fund announced the review of its investments managed by private equity fund, Cerberus Capital Management after the shooting incident at Sandy Hook Elementary School in Connecticut.

CALSTRS Reviews Cerberus Gun Related Investments

Cerberus Capital Management owns Freedom Group Inc, the largest guns and ammunitions manufacturer in the United States. CALTRS is one of the largest shareholders of Freedom Group with 2.4 percent stake in the company.

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According to CALSTRS, the shooting in Connecticut prompted people to call for a change and it is determining what it can do differently to ensure such unthinkable incidents never happen again.

In a statement, the pension fund said, “In our case, CalSTRS investment staff immediately began reviewing our investments in private equity funds, managed by Cerberus Capital Management (Institutional Series Three and Series Four), that are invested in the Freedom Group which manufactures firearms. Our investments staff also initiated discussions with Cerberus to learn more about the facts surrounding the investments.”

On Monday, Bill Lockyer, state treasurer for the state of California asked CALTRS and the California Public Employees Retirement System to review their investments. He asked the pension funds to divest their stakes in any company engaged in making guns that are prohibited for sale in the state.

“Our objective is to make sure that both Calpers and Calstrs are scrubbed clean of any investment in any company that makes guns that are illegal in this state and expose our communities to violence and death,” said Lockyer, “These weapons have no place in our communities. Our families and children are safer without them.”

CALSTRS said, it would evaluate not only the financial potential but also the environment, human, and social impacts of its future investments.

On the other hand, Cerberus Capital Management announced its decision to sell its stake in Freedom Group. According to the private equity firm, it will retain a financial adviser to execute the sale of its interests in the guns and ammunitions manufacturer.

In a statement, Cerberus Capital Management said, “It is apparent that the Sandy Hook tragedy was a watershed event that has raised the national debate on gun control to an unprecedented level. The debate essentially focuses on the balance between public safety and the scope of the Constitutional rights under the Second Amendment. As a firm, we are investors, not statements or policy makers. It is not our role to take positions, or attempt to shape or influence the gun control policy debate. That is the job of our federal and state legislators.”

Cerberus Capital Management believed that selling its stake in Freedom Group is the right way to meet its obligation to protect the interests of its investors.

Shares of gun makers have been falling over the past several days. Shares of Sturm, Ruger & Company (NYSE:RGR) are down 21% in the past five days, while shares of rival Smith & Wesson Holding Corporation (NASDAQ:SWHC) are down 20% over the same time period.