WASHINGTON - In a few weeks, Union Labor Life Insurance Co. Inc. will hold its third investment conference on foreign soil - but for now, the union-owned financial services institution is more interested in teaching prudence than in winning clients.
"This is a very nice segue into recognizing that we are moving toward international economic relationships," said Michael Steed, vice president for investments at ULLICO, Washington. "We need to be ahead of the trend and not behind it."
Through the Hassan Fathy Institute - a Rome-based group that focuses mostly on health and safety issues - ULLICO has introduced itself to foreign building and construction union plan sponsors that are converting from pay-as-you-go systems to private pension plans.
Union plan sponsors, mostly from Argentina, Chile, Spain, Italy and the United Kingdom, have participated in ULLICO's investment conferences to learn how U.S. union plan sponsors run their funds, allocate assets, create screens for investments and abide by government regulations. The third conference, scheduled for early November, will be for union funds in Slovenia, Slovakia and Bulgaria.
For the most part, these union plan sponsors are very sophisticated in economic issues, but lack the nuts and bolts regulations. For example, foreign plan sponsors were concerned about protecting against inflation and currency risk, something many Americans at the conference didn't realize, said Teresa Ghilarducci, associate professor for economics at the University of Notre Dame, South Bend, Ind., who participated in the seminars as an AFL-CIO consultant.
U.S. speakers spent a good deal of time explaining the 1974 Employee Retirement Income Security Act and its fiduciary, diversification and prudence responsibilities. Many of the foreign plan sponsors were interested in how these responsibilities would allow them to invest in small business projects and other economically targeted investments.
Although some of the funds are limited to legal investment lists, many foreign union plan sponsors were interested in how to structure an ETI program prudently, to get a good return on the investment and to help sustain union jobs.
"This was surprising - it was a very easy idea to get across that reasonable people see that you can do both at the same time," Ms. Ghilarducci said. "Only in America is this a real controversial issue."
At the first conference, the Hassan Fathy Institute's general board passed a resolution that would create an international non-profit corporation to develop international ETIs. Although in its preliminary stages, the Hassan Fathy ETI would pool pension assets to invest in labor-friendly investments. The investment also would provide an attractive rate of return for the level of risk involved.
In addition, the group created an international advisory committee, representing public and private pension funds and international money managers to create a clearinghouse of information and ideas.
Mr. Steed said the Hassan Fathy ETI would first follow ERISA standards of prudence and other fiduciary duties when constructing the investment.
In addition, Hassan Fathy would act as a partner with local groups where the investments would be made to ensure a better understanding of local economic factors.
"The only way to do this kind of investment is to have that kind of care," Mr. Steed said.
Eventually, as these plans increase in assets, they will need to diversify further and ultimately will need to invest in U.S. markets, Mr. Steed said.
This is where all of the groundwork will pay off for ULLICO, he said.
"Not only are we the educator and the facilitator, we'll go one step further and become the mechanism in which they invest" in the United States, Mr. Steed said.
"But this is not something that's going to be realized tomorrow."