AFT spotlights investment managers' unsavory connections

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A new AFT report on hedge fund managers and the ways their actions are undermining workers' retirement security is attracting widespread media attention and causing a stir among hedge fund tycoons.

The new report, "Ranking Asset Managers," which is intended for use by pension trustees, looks at 34 executives at hedge funds and other investment firms and their ties to organizations advocating for the elimination of traditional defined benefit plans.

"This is about transparency—a right to know," says AFT president Randi Weingarten. "America's workers and pension trustees deserve to know if the asset managers with whom they are investing their hard-earned retirement savings are also aligned with organizations advocating for the elimination of those same pension plans." Among those groups are StudentsFirst, the Show-Me Institute and the Manhattan Institute.

"With transparency and disclosure," Weingarten adds, "trustees can make informed decisions about the risks their plans face."

Jay Rehak, who is president of the Chicago Teachers' Pension Fund, told the Wall Street Journal: "I have an issue with people thinking they can play both sides. They come to us with their hand out, and then they are stabbing us in the back."

One hedge fund manager in particular has been in the spotlight recently, much to his displeasure. Daniel Loeb is founder and CEO of Third Point LLC, which manages $11.6 billion, including hundreds of millions of dollars on behalf of public pension funds. Loeb has a net worth of $1.5 billion; in 2012 alone, he took home an estimated $380 million. At the same time, Loeb sits on the board of StudentsFirstNY, which advocates scrapping the traditional pension plans that provide stable retirement income for teachers and replacing them with 401(k) plans.

Reporter Matt Taibbi wrote about Loeb, and Weingarten's attempts to engage him in a productive dialogue about his connections to StudentsFirst, in a recent blog for Rolling Stone. Loeb, who had been scheduled to speak on April 17 to the Council of Institutional Investors conference in Washington, D.C., cancelled that appearance and complained about media reports criticizing his involvement with StudentsFirst. Loeb is also a trustee of the Manhattan Institute.

The AFT report includes background on the organizations attacking defined benefit plans, a list of leading investment firms and how they are connected to the organizations, and issues for pension trustees to consider when they make decisions about hiring investment managers. [Dan Gursky, Wall Street Journal, AFL-CIO]

April 18, 2013