New York City and CalSTRS are among the big pension funds considering whether to divest their shares in gun manufacturers.
Their scrutiny follows the Dec. 14 mass shooting at a school in Newtown, Conn., that left 26 people dead, including 20 children.
The $127.8 billion New York City Retirement Systems has about $18 million invested in four weapons and ammunition manufacturers — Smith & Wesson Holding Corp.; Sturm, Ruger & Co. Inc.; Olin Corp.; and Brazilian conglomerate Forjas Taurus SA. The investments are in externally managed passive and active equity portfolios.
“We are currently conducting a review of our holdings and aggressively exploring all options, including divestment,” a spokesman for the New York City pension funds said.
Bill de Blasio, public advocate for New York City and a trustee for the $43.3 billion New York City Employees' Retirement System, is taking it a step further. In a letter to City Comptroller John Liu, who oversees the employees' fund along with the four other pension funds that comprise the city retirement system, Mr. de Blasio said he wants NYCERS to “purge” all gun investments.
“The increased liability from such exposure, and gun companies' links to the horrific Newtown tragedy, make such exposure a poor investment decision,” Mr. de Blasio said in the letter.
Increased regulation and possible litigation against these gun manufacturers could have an adverse effect on pension funds that are invested in the sector.”
The day after the shootings, the $154.8 billion California State Teachers' Retirement System, West Sacramento, initiated discussions with alternatives manager Cerberus Capital Management LP on its investment in weapons manufacturing conglomerate Freedom Group Inc.
On Dec. 18, shortly after CalSTRS announced it would review its investment with the private equity manager, Cerberus announced it would sell its investment in Freedom Group, a firearms manufacturing holding company that owns, among other companies, Bushmaster Firearms International LLC and Remington Arms Co Inc. Authorities in Newtown said the gunman, Adam Lanza, used a Bushmaster XM-15 rifle in the Newtown mass shooting.
CalSTRS has about $751 million committed to Cerberus, including $600 million to two funds that hold the Freedom Group investment.
“We concur with the action Cerberus has taken and feel they're doing the right thing,” CalSTRS spokesman Ricardo Duran said in a telephone interview.
Officials at other large pension funds, including the $150.1 billion New York State Common Retirement Fund, Albany, and the $49.5 billion Pennsylvania Public School Employees' Retirement System and $25 billion Pennsylvania State Employees' Retirement System, both in Harrisburg, all voiced support for Cerberus' quick decision to sell its stake in Freedom Group.
Eric Sumberg, spokesman for New York State Comptroller Thomas P. DiNapoli, trustee of the New York state pension fund, said staff will review the fund's investments in firearms manufacturers.
Other pension funds whose officials have said they will review weapon-related investments include the $7.5 billion Rhode Island Employees' Retirement System, Providence; $24.7 billion Connecticut Retirement Plans and Trust Funds, Hartford; and the $37.5 billion Illinois Teachers' Retirement System, Springfield.
CalSTRS in 2008 — after its Cerberus commitments — established a vetting process for potential investments that tests the social, environmental and human impacts, including threats to human well-being.
CalSTRS executives are looking at all of the fund's investments in the weapons industry and determining how appropriate it is to include weapons companies in its portfolio. The next step is a discussion of the review's finding, to be held at the pension fund's Jan. 9 investment committee meeting. That discussion will provide a “more comprehensive sense of exposure to the industry,” Mr. Duran said. The reviewwill look at passive and active exposure and create a list of companies and how much is invested in each.