PSERS Considers Suing Aon for Miscalculating Returns

Link: https://www.ai-cio.com/news/psers-considers-suing-aon-for-miscalculating-returns/

Excerpt:

At their board meeting last week, Pennsylvania’s Public School Employees’ Retirement System voted to hire law firm Blank Rome to help determine if it should sue Aon, an investment consultant the pension fund hired.

The potential suit concerns a calculation error Aon made that caused PSERS to inaccurately report its returns in December 2020. While initially the nine-year performance figure was reported to be 6.38%, a correction showed that it was in fact lower, and thus below the threshold needed to prevent increased contributions. When the miscalculation was revealed in March 2021, the pension fund’s beneficiaries were forced to increase their payments.

PSERS paid Aon $7.2 million for investment advice over the course of almost a decade. Currently, Aon is still employed by PSERS. Both the FBI and the SEC are investigating the miscalculation. PSERS is also under investigation for gifts given by Wall Street firms to PSERS employees.

Author(s): Anna Gordon

Publication Date: 16 May 2022

Publication Site: ai-CIO

Public Pensions’ New Quandary: Coping With Geopolitical Turmoil

Link: https://www.governing.com/finance/public-pensions-new-quandary-coping-with-geopolitical-turmoil

Excerpt:

Arguably, trustees and investment teams need a serious conversation with portfolio managers who are overweight in companies and countries that could foreseeably lose favor and stock exchange value. To ground that dialog, some form of risk analysis is required. One protocol could be as primitive as routinely identifying which major corporate equity and debt holdings in a system’s portfolio have cost and revenue exposure of more than 10 or 15 percent in such potentially at-risk regimes, and prodding managers to trim down those geopolitically vulnerable positions unless there is a clearly compelling undervaluation thesis. Another sensible approach would be to require underweighting of major companies relative to a benchmark index, based on their percentages of autocrat-nation revenues.

Ultimately at a fiduciary level, if a pension fund’s total worst-case exposure to all earnings and income derived from autocratic nations is an insignificant fraction of its total portfolio, the composite risk is probably not worth losing sleep over, on purely financial grounds. But politics could still enter the theater stage for pension boards that ignore this issue.

Pension consultants and risk advisers have a new role to play in this dialog. ESG investing is now under fire, so a healthy ESG+G discussion is especially timely. If nothing else, informed advisers can help investment teams and trustees identify where their portfolios might contain a blind-side risk that hasn’t received enough attention.

Author(s): Girard Miller

Publication Date: 10 May 2022

Publication Site: Governing

I Finance The Current Thing

Link: https://allenfarrington.medium.com/i-finance-the-current-thing-7ea204230315

Excerpt:

Passive investing is most often celebrated as a marvel of risk/reward packaging for the retail investor, who surely doesn’t have the time or energy to do the job of a professional capital allocator. It’s a fair assumption that they have their own job doing something productive in the real economy. Is this arrangement worth sacrificing? Would sacrificing it be ESG-friendly? Yes, absolutely it would, but we will return to this further down.

Passive investing relies on the notion of an index, or, a numerical weighting of every publicly listed company in a given geography, above a certain size, etc. which is determined by relative size and expressed as a percentage of the whole. If the value of all shares outstanding multiplied by their current market price (or, “market capitalization”) of Company A is 1% of the total of all the companies in an index, then it makes up 1% of that index, and its shares are 1% of those held by a passive investment instrument.

The existence of indices is the bane of the lived experience of investment professionals who take Schumpeter a little more seriously and do not allocate by algorithm but by analysis of business fundamentals. “Performance” is measured relative to an index, on the understandable but perverse realization that index investing, which relies only on an algorithm, is much cheaper for the client. If your non-passive (or “active”) manager returned you 50%, you might think that is fantastic, but if the index went up 60% then you paid for nothing. In fact, technically they underperformed by 10%. No performance fees — even on 50%! — and probably also fired.

….

When SEC Commissioner Hester Peirce voiced the lone dissent against the inclusion of “climate risks” in company prospectuses recently, her argument was basically my own above: these are risks. Although the concept is incredibly technically involved, real investors know how to deal with risks and do not need to be condescended to about which deserve their attention more than others. “We are not the securities and environment commission,” Peirce warned, adding, “at least not yet.” Quite right. I would hope not ever if the rule of law is to be taken seriously, and exactly this kind of regulatory capture via backdoor-compliance enforcement of virtue signaling is to stop.

But could we probe deeper still? ESG is an attack vector, but what is the attack surface? Without intending to be flippant, I think it is centralization. Capital markets are centralized institutions and they are being attacked. So far, so bleak. Can we do anything about it? And what was that Thiel talk actually about, again?

Author(s): Allen Farrington

Publication Date: 21 April 2022

Publication Site: Medium

Blackstone Doubles Insurer Assets, Faces Questions About Role

Link: https://www.thinkadvisor.com/2022/04/22/blackstone-doubles-insurer-assets-faces-questions-about-role/

Excerpt:

Blackstone loves managing assets for insurers, but it has no interest in assuming a large amount of investment risk itself.

Blackstone Executives talked about the skin-in-the-game idea Thursday, during a conference call the company held to go over first-quarter earnings with securities analysts.

Patrick Davitt, an analyst with Autonomous Research, asked Blackstone executives Thursday about reports that some insurance regulators have concerns about independent money managers’ role in handling insurers’ investments.

“Some observers have suggested that an outcome of these reviews could be a requirement of more skin in the game for the managers, particularly those that aren’t consolidated with their insurance counterparties,” Davitt said. “So, first, what is your position on this focus? Do you think there’s a risk that regulators will require more skin in the game?”

Author(s): Allison Bell

Publication Date: 22 April 2022

Publication Site: Think Advisor

Federal prosecutors have been investigating D.C.’s pension board, responsible for $10 billion retirement fund

Link: https://www.washingtonpost.com/dc-md-va/2022/01/23/dc-pension-fund-investigation/

Excerpt:

Federal prosecutors have been investigating the financial transactions of the D.C. Retirement Board, which manages the city’s $10 billion pension fund for retired teachers, police officers and firefighters.

The fully funded municipal employee pension plan has long been the jewel in D.C.’s financial crown, the envy of other cities and a signal of the trustworthiness of the District’s finances to the credit rating agencies that issue municipal bond ratings.

….

The existence of the investigation was disclosed in a whistleblower lawsuit filed in December against the D.C. Retirement Board by Erie Sampson, the agency’s general counsel since 2008.

Sampson alleges that she was placed on administrative leave in October in retaliation for alerting officials at the retirement board and in D.C. government, including the city’s chief financial officer and members of the D.C. Council, about problems in the retirement board’s accounting and governance — as well as for cooperating with the federal investigation.

A spokesperson for the retirement board declined to comment, citing the ongoing litigation.

Author(s): Julie Zauzmer Weil

Publication Date: 23 Jan 2022

Publication Site: Washington Post

PSERS Signs Verus in ‘Emergency’ Hiring to Handle CIO Duties

Link: https://www.fundfire.com/c/3145634/397343/psers_signs_verus_emergency_hiring_handle_duties

Excerpt:

The $64 billion Pennsylvania Public Schools’ Retirement System made the “emergency” hiring of an outside manager yesterday to take on the duties of chief investment officer James Grossman, the Philadelphia Inquirer reports.

Seattle-based Verus Investments will now handle “monitoring and oversight of investment” as the embattled pension system deals with “internal and external investigations,” including an FBI probe into its investing, PSERS says.

The fund’s investment of millions of dollars in real estate deals in Harrisburg is under federal investigation, while outside lawyers are looking into an “error” that inflated PSERS’ investment returns.

Author(s): Kathleen Laverty

Publication Date: 21 April 2021

Publication Site: FundFire

The New Zealand Pension Fund announced a $ 17.5 million bitcoin (BTC) investment in October

Link: https://www.1olay.com/2021/03/the-new-zealand-pension-fund-announced.html

Excerpt:

It has emerged that a New Zealand fund manager invested $ 17.5 million worth of Bitcoin in October 2020, when BTC was around $ 10,000. According to James Grigor, the company’s Chief Investment Officer, KiwiSaver Growth Strategy recently invested 5% of its money in Bitcoin.

While several investors from KiwiSaver are unhappy with the decision, Grigor believes Bitcoin has become a commodity similar to gold and has many similar features, such as working as a store of value against Fiat hyperinflation. The official told New Zealand news agency stuff:

Author(s): Tahsin

Publication Date: 28 March 2021

Publication Site: 1olay