STUMP » Articles » Shoe Is On the Other Foot: Police Unions Call for Nike Divestment (and other divestment follies) » 6 September 2018, 06:12

Well, well, well.

You didn’t think the divestment winds would blow only one way, did you?

Bloomberg: As Nike Boycott Gets Underway, Next Battleground May Be Pensions
:

Calls to boycott Nike Inc. products are already making the rounds, now that it’s using quarterback Colin Kaepernick in new ads. Will calls for state pension plans to divest its stock be next?

Five large state pension plans that manage retirement savings of law enforcement workers, as well as other public employees, own more than $400 million of Nike stock all told, based on each fund’s latest filing and Tuesday’s closing price. To be sure, that represents well under 1 percent of Nike’s market value.

….
The National Association of Police Organizations has already issued a statement calling for a boycott of Nike products. A spokeswoman said the boycott also applies to the company’s stock but that any response is up to member organizations. Police have been critical of Kaepernick after he started kneeling for the national anthem to protest racism and police brutality in the U.S.

This is dumb. It’s a small percentage of the pension funds, and it’s a small percentage of Nike stock.

But hey, let’s get a boycott idea from the left: the National Inquirer! (or is it with an E? Oh, whatever.)

EVIL GOSSIP RAG STOCK IN PENSIONS

N.J. public worker pensions connected to National Enquirer, Trump probe

New Jersey’s public pension fund has since 2014 invested $500 million with an owner of the National Enquirer, the supermarket tabloid embroiled in the investigation of President Donald Trump’s former lawyer, Michael Cohen.

The New Jersey State Investment Council that oversees the $78.6 billion public worker pension fund has invested $200 million and $300 million, respectively, with investment vehicles managed by New Jersey-based Chatham Asset Management.

Chatham Asset Management, along with Omega Charitable Partnership, owns American Media Inc., the publisher of the National Enquirer.

OOGIE BOOGIE.

via GIPHY

This is getting ridiculous. Okay, it’s been ridiculous, but this is just silly.

Even the information given – there is AT MOST a $500 million out of $78.6 billion total investment. That’s 0.6% of the fund.

That said, Chatham Asset Management sure as hell did not put all $500 million in American Media. And for American Media, well:

American Media filed for bankruptcy in 2010. In 2014, it was acquired by Chatham Asset Management and Omega Charitable Fund. Chatham owns nearly 80 percent of the company, according to a 2016 filing with the U.S. Securities and Exchange Commission.

So, how much is American Media worth? Hmmm? Don’t know – it’s privately held.

But here are its titles:

ACTIVE LIFESTYLE GROUP

• MEN’S JOURNAL
• MUSCLE & FITNESS
• MUSCLE & FITNESS HERS

ENTERTAINMENT GROUP

• US WEEKLY
• STAR
• OK!
• RADAR
• IN TOUCH WEEKLY
• LIFE & STYLE
• CLOSER
• SOAP OPERA DIGEST
• NATIONAL ENQUIRER
• GLOBE

They recently sold one of their magazine titles to another publisher for $79 million. Anyway, I have a feeling that whatever National Enquirer’s legal troubles, the actual financial exposure of the parent company… eh. Maybe they screwed up their liability/indemnity stuff. Maybe.

The point is one should take a long-term view on the investments, given that it’s long-term liabilities they’re supposed to be supporting. Perhaps Nike’s marketing is just a bad blip, and the effect will not be long-standing… or maybe it’s a great move… (which will also not be long-standing) … or maybe it’s irrelevant.

Similarly, America Media may unload National Enquirer on some other group, or maybe the latest brou-ha-ha will boost it… (for that kind of rag, it’s not like “scandal” is going to hurt it – I mean, I didn’t drop my Weekly World News subscription when I heard Bat Boy was colluding with the Russians) .. and maybe it’s going to be a troublesome investment because print media is in trouble in general. Lots of dimensions on which to do analysis.

OTHER DIVESTMENT AND INVESTMENT STORIES

I do have a follow-up to the AFT piece story on private prison divestment in draft, but I’ll have to come back later. They said they had at least two parts to their study, and the second part hasn’t come out (as far as I know)… I wanted to wait. I may wait only so long, though.

• Pensions & Investments: New Jersey Pension Fund divests $1.3 million stake in private prison company – Pensions & Investments
• The Guardian: Council pension funds are major investors in tobacco companies
• UPI: Teachers’ union urges divestment from companies profiting off immigrant detention
• Bloomberg Law: N.Y., Other State Pensions Slow to Divest From Private Prisons
• Democrat & Chronicle: Don’t play politics with our pensions
• Times Union: NY Comptroller accused of using fund to advance partisan agenda
• Forbes: Three Cheers For The Los Angeles Times – on praising Calpers/Calstrs from eschewing the divestment fight
• Reuters: U.S. teachers’ union urges pensions to cut investment in private prisons
• Governing: Abolish ICE? These Cities, Public Colleges, Politicians and Pension Funds Have Financial Ties to ICE and Detention Centers
• John Bury: NJ Pension – National Enquirer – Trump – and Christie Too.
• AI-CIO: Union Urges Divestment from Immigrant Detention
• AI-CIO: Chicago Teachers to Divest Private Prisons, Immigration Detention Centers
• Bloomberg: Calif. Pensions Reviewing Investments Tied to Border Enforcement (1)
• Capital & Main: Ohio, NJ and California Pension Funds Invested $885 Million in Hedge Fund That Controls National Enquirer Parent
• AI-CIO: Yale Blocks Future Gun Investments
• Calpers’ Bet on Sacramento’s Planned Tallest Tower Splits Board
  

Let’s look at those last two. First, for the Yale decision:

Yale University’s endowment has barred investments in retailers that sell firearms to the public.

The $27.2 billion endowment’s advisory committee on investor responsibility recommended the ban to a group of board trustees in the spring. The group had recently adopted the policy, with the Connecticut college acknowledging the change in an August 21 statement.

“The loss of life resulting from mass shootings in our country is deeply tragic,” the statement read. “The ACIR [Advisory Committee on Investor Responsibility], which advises the Yale Corporation Committee on Investor Responsibility (CCIR), determined that mass shootings cause incontrovertible societal harm and retailers supplying assault weapons to the general public cause grave social injury, a conclusion supported by the CCIR.”

I have no particular issue with this decision (other than the extremely weak leak between legal gun retailing and mass shootings (note: I am an NRA Life Member)). Yale is a private university, and their endowment can invest as it pleases. There’s no particular fiduciary duty to base decisions on expected return or asset-liability matching alone. Those “harmed” by this decision would be Yale itself (Yale has no obligation to have funds to pay for professorships, etc. It can go bankrupt) as opposed to pensioners to whom a legally-binding promise had been made.

That last one is not exactly about divestment, but it is about a real process of making long-term investment decisions:

Sacramento officials are cheering a decision by the California Public Employees’ Retirement System to build what would be the tallest tower in its hometown. But some inside Calpers’s boardroom are concerned the 550-foot project represents too much risk.

During a private meeting earlier this summer, three Calpers directors voted against a new $550 million commitment to the proposed office-condominium-retail complex, according to people familiar with the situation. Calpers abandoned a previous development plan for the same site in 2007.

The dissent came after board members reviewed a memo from an outside consultant that raised some concerns about the project’s return forecasts, these people said. The specific votes and memo haven’t been previously reported. A majority of other members of the 13-person board agreed to support the project as long as it yielded a 5.8% return and 40% of the office space was pre-leased.
….
These funds are under pressure to hit aggressive return targets as a way of closing widening funding gaps. They are also heavily dependent on local political support, relying on government contributions to supplement investment income. Their boards are typically staffed by political appointees, union officials and local business leaders.

In California, Calpers hasn’t always made decisions that were popular locally. It has resisted calls from activists and state officials to divest itself of politically controversial investments. Cities in California have complained about how much it costs them to participate in the Calpers system. When the fund elected to lower its investment-return assumptions in 2016, it chose to phase in the change gradually to soften the impact of higher yearly pension costs on local governments.

I’ve not been involved in evaluating specific investments, but I have been a part of sector/factor analysis. It is fine to turn down a potential investment, or divest from something, based on relevant analysis, such as looking at what exposure to a particular risk class one already has in the portfolio, and what you need to be compensated for the risk you’re taking on.

WE DON’T LIKE IT!!! is not relevant analysis.