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Money managers

Teachers union adds three firms to list of DB busters

031714 weingarten
AFT President Randi Weingarten calls the list an exercise in disclosure and transparency.

The American Federation of Teachers added three firms to its list of money managers and others that the union claims are assisting or supporting the elimination of defined benefit plans despite accepting billions of dollars of business from them.

The three firms — Aon PLC, GTCR LLC and Highbridge Capital Management — join 26 others first listed in April 2013 in the report “Ranking Asset Managers: A Retirement Security Report on Money Managers for Pension Fund Trustees.”

It is the union's second such report featuring what it calls money managers with top executives who have “contributed to, or sit on the governing board of, an organization that advocates for the replacement of defined benefit plans with defined contribution or cash balance plans.”

The new report will be distributed to pension funds on March 18. Randi Weingarten, president of the Washington-based union, said the union is not suggesting action be taken by boards of trustees; the report is primarily an exercise in disclosure and transparency.

“We are just making it clear ... what roles some asset managers have,” Ms. Weingarten said in a telephone interview. “We're trying to make sure that pension funds know the efforts that some of these same asset managers have made to harm retirement security.”

“The exercise was simply to say these are asset managers — while they are seeking to enrich themselves or make money off of your pension fund — they are also actually trying to diminish (your) participant's retirement security or other participants' retirement security,” said Ms. Weingarten.

Ms. Weingarten said the overall response to the report issued last year was positive and led to the updated version produced this month. She said the union will not necessarily make this a regular annual report.

Of the three new firms, the union puts special emphasis on Chicago-based private equity manager GTCR. The union added the firm because of its connection with current Illinois Republican gubernatorial candidate Bruce Rauner.

Mr. Rauner had been a partner with the firm since 1981, a year after its founding, and retired as chairman in October 2012.

The report states Mr. Rauner, “who still holds partnership interest in GTCR funds, advocates for the elimination of defined benefit plans.”

“Having earned millions 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,” the report said.

Officials at Mr. Rauner's campaign office and GTCR spokesman Jim McNitt did not reply to requests for comment by press time.

Aon $100,000 contribution

Ms. Weingarten said the primary driver behind the addition of Aon is what she cites as the Aon Foundation's $100,000 contribution in 2012 to the Commercial Club of Chicago, which launched the “Illinois is Broke” campaign supporting pension reform legislation in the state.

Aon PLC is the parent of Aon Hewitt and investment consulting firm Hewitt EnnisKnupp.

“Aon is a member of many civic and community organizations across the U.S., including the Commercial Club of Chicago,” said Aon Hewitt spokeswoman MacKenzie Lucas. “Aon has always has been a strong advocate for improving the retirement security of American workers and understands the unique challenges facing public pension plan sponsors. We will continue to work closely with our clients to provide solutions that address these challenges and help workers achieve their retirement goals.”

The union added Highbridge Capital Management because of the firm's chairman, Glenn Dubin, contributing “to the political activities of StudentsFirstNY.”

The union cites StudentsFirst's policy position that “states should move from defined benefits to retirement plans that are more sustainable and can be immediately accessed by all teachers” as a reason for its inclusion in the union's list. Mr. Dubin did not respond to phone calls seeking comment.

Two firms that had been included in all versions of the report last year have been removed.

Hedge fund manager Khronos LLC was on last year's list due to the presence of Managing Partner Rafael Mayer on the board of StudentsFirstNY.

The firm was removed because Mr. Mayer is no longer a director. Mr. Mayer was not available by press time to provide any comment.

Hedge fund Centaurus Advisors also was removed from the list because the firm had closed in May 2012, before the first list was published.

First published last year

The union's first Ranking Asset Managers report was published in April 2013 and included 33 money managers. That list was amended in May to remove six firms, including AQR Capital Management and KKR & Co. Following the publication of the report, executives at both firms detailed their support for DB plans in letters to their pension plan investors.

CalSTRS' reaction

The $176.2 billion California State Teachers' Retirement System, West Sacramento, was the highest profile pension fund with a quick reaction to last year's report. Following its release, CEO Jack Ehnes sent it to CalSTRS' investment committee.

The committee “has registered a heightened level of concern about the situation. Our investment staff has been in communication with the impacted managers and continues to closely monitor this development,” said CalSTRS spokesman Ricardo Duran in an e-mail.

This article originally appeared in the March 17, 2014 print issue as, "Teachers union adds three firms to list of DB busters".