IPFI Applauds CalPERS for Choosing Fiduciary Responsibility Over Political Pressure


March, 14, 2019

IPFI Applauds CalPERS for Choosing Fiduciary Responsibility Over Political Pressure

Instead of caving to fringe political movements, IPFI commends CalPERS for prioritizing its members and opposing legislation forcing it to divest from private prison companies.

WASHINGTON, D.C. – As California faces the possibility of another forced divestment, the Institute for Pension Fund Integrity (IPFI) supports California Public Employees’ Retirement System (CalPERS) for prioritizing California’s public retirees and focusing on their fiduciary responsibility. CalPERS’s opposition to California bill AB 33, introduced by State Assemblyman Rob Bonta (D-Alameda), comes ahead of the March 18 investment committee meeting. AB 33 would require CalPERS to divest stocks or bonds in private prison companies on or before July 1, 2020, despite the stable and profitable returns those investments provide.

In agenda materials released ahead of the investment committee meeting next week, CalPERS argues against any divestment from private prison companies for two primary reasons. The first, is that their “primary duty and obligation” is to their members, and that divestment would result in worse investment performance by compromising current strategies and incurring unnecessary transaction costs. The second reason that CalPERS explains is that divestment rarely achieves the political or social agendas it tries to address. This further highlights that the divestment would be purely political, inherently harming the retirees who depend on CalPERS to provide the retirement they have worked so hard for. IPFI is in full agreement with CalPERS and urges other public pension funds to continue prioritizing their fiduciary responsibility over political movements.

Beyond the principles opposing divestment, there are real costs associated with the potential requirement. CalPERS estimates that if it sold the private prison companies’ stock, it would lose $175,000. This would be on top of the 0.7% loss already incurred based on other divestments like from tobacco or thermal coal companies. “CalPERS simply cannot gamble away the money of its retirees based on political preference,” said IPFI President Christopher Burnham. He continued, saying “As financial professionals, we hold no higher responsibility than that of our fiduciary duty, and CalPERS is making the right decision to oppose the mandatory divestment, and I congratulate them.”

As the fight for fiduciary responsibility continues, California public retirees have a strong leader in CalPERS Chief Investment Officer Ben Meng. Unlike his counterparts at CalSTRS, who voted in November to divest from private prisons, Meng has steadfastly prioritized the fiscal health of the fund over political whims. IPFI stands with Meng as he continues this pattern of leadership at the March 18 investment committee meeting. IPFI supports CalPERS for choosing its fiduciary responsibility over politics.

For more on IPFI’s positions regarding divestment and fiduciary responsibility, see IPFI’s latest research available on www.ipfiusa.org and follow us on twitter @SecurePensions