The American Federation of Teachers (AFT) has updated its ‘Watch List’ of asset managers that it says have ties to groups that attack workers’ defined benefit pension plans. It claims that the first list published last April has already had an impact and that several Wall Street firms have cut ties with groups to avoid being added to the AFT list.
AFT looks for ties to anti defined-benefit groups
“In addition to the primary economic considerations, pension trustees also may take into account certain collateral factors, such as a manager’s position on collective bargaining, privatization or proposals to discontinue providing benefits through defined benefit plans,” the AFT writes in its recent whitepaper Ranking Asset Managers.
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Its argument is that while risk-adjusted returns should be the main criterion for choosing an asset manager, involvement in political groups or campaigns that would undermine the pension’s beneficiaries can act as a tie-breaker among equally qualified fund managers.
To determine which funds get added to the list, the AFT has identified four groups that it thinks are at the forefront of attacking defined-benefit pensions and looks for connections between those groups (StudentsFirst, The Show-Me Institute, the Manhattan Institute, and the Illinois Is Broke campaign) and prominent funds. Icahn Enterprises LP (NASDAQ:IEP) is on the list, for instance, because Carl Icahn is a director of StudentsFirstNY. Elliott Management makes the list because CEO Paul Singer is chairman of the Manhattan Institute, Julian Robertson of Tiger Management has donated to StudentsFirst, and Dan Loeb of Third Point LLC is a director of StudentsFirstNY.
New additions to the list this year include Aon Corp., GTCR, and Highbridge Capital Management while Centaurus Advisors LLC and Khronos were on the 2013 list but taken off this year.
AFT wades into Illinois governor’s race
“A special mention is reserved for Illinois Republicans gubernatorial candidate Bruce Rauner who retired as chairman of GTCR, a Chicago-based private equity firm, in 2012,” the AFT writes, moving away from asset managers and wading into politics. “GTCR manages billion in public employee pension funds. Having earned million as an asset manager of defined benefit plans, Rauner is now, as a gubernatorial candidate, calling for freezing the benefits of the state’s defined benefit pension plans and putting all new public employees in a defined contribution plan.”
His involvement puts GTCR on the AFT watch list of course, but the contradiction between having previously managed defined-benefit pension funds and now running against them has clearly ticked off the AFT, as Rauner is mentioned multiple times in its whitepaper.
Full report from AFT below RankingAssetManagers_030514