James Freeman on poor performance at Calpers due to political activism

There is no such thing as a free lunch.  Activists who think they can use public companies to pursue political agendas without endangering shareholder returns are indulging in a fantasy.  Disappointing results at a giant government pension fund cannot all be tied to political agendas, but the retired workers who rely on Calpers have every right to demand that fund managers adopt a singular focus on maximizing returns. 

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Let’s hope Calpers finally gets it, and a good fresh start would include a determination to urge portfolio companies to simply pursue profits, not politics.  For years, the big fund has been fairly active in pursuing the latter, despite early red flags.

~ James Freeman, "An ESG Champion Stumbles," WSJ, September 28, 2022

Stephanie Pomboy on the coming pension crisis

The pension funding problem will be the next crisis.  We are looking at a $4 trillion pension deficit across the public and private sectors in the U.S., after nine years of rampant asset inflation.  That's a stunning statistic.  If the market corrects even 15%, and stays there, it will bore massive holes in pensions.  New Jersey, Illinois, state after state, are figuring out how to close this gap.

~ Stephanie Pomboy, founder, MacroMavens, "How the Fed Will Trigger the Next Crash," Barron's, March 24, 2018

Arkansas Teacher Retirement System executive director on Pershing Square's 25% return in the first half

When you are with the best of the best, there is no being excited about these numbers.  It just confirms what you already knew. Brilliant people will make you money over time.

~ George Hopkins, executive director at Arkansas Teacher Retirement System, an investor in Pershing Square, "Ackman's hedge fund Pershing Square surges 25% in first half," Reuters, July 3, 2014

ERISA puts pensioners at the front of the line of corporate liabilities

As of Labor Day 1974, the capital structure of every firm with an unfunded vested pension liability was altered. The Employment Retirement Income Security Act (ERISA) gave these liabilities a claim equal to a federal tax lien; that is, senior to debentures, bank loans, and the claims of other corporate creditors. Prior to ERISA, the legal claims of beneficiaries were limited to the assets of the pension fund.

~ Linda J. Martin and Glenn V. Henderson, Jr., "On Bond Ratings and Pension Obligations: A Note," Journal of Financial and Quantitative Analysis, December 1983