This is an angle I hadn't thought about before ~ I like it ~ a lot ~ but the "fiduciary duty" question could create mushrooming annuities for lawyers for years ~ Sooz

Big Teachers’ Fund to Sell Its Gun Shares
By MARY WILLIAMS WALSH and MICHAEL COOPER
Published: January 9, 2013

One of America’s largest pension funds began on Wednesday to divest itself of firearms holdings, a response to the schoolhouse shooting in Newtown, Conn., that other pension funds could follow.

The California State Teachers Retirement System, known as Calstrs, voted unanimously to begin its formal divestment process. The vote occurred at a public meeting where teachers said they did not want their retirement nest eggs placed with companies like the Freedom Group, the maker of the Bushmaster semiautomatic rifle that authorities say Adam Lanza used to kill 20 first graders and six adults at the Sandy Hook elementary school on Dec. 14.

“This latest incident, which occurred at a school and involved fellow educators and the children we cherish, is a tipping point for Calstrs,” said Harry Keiley, chairman of the fund’s investment committee.

Divestment involves several steps, to make sure fund officials comply with their fiduciary duty to protect the assets being accumulated for teachers and retirees. It took Calstrs several years to divest its tobacco holdings. Mr. Keiley predicted the firearms industry would come under market pressure that could make it an unsound investment.

The move puts the California teachers’ fund at the forefront of a movement to reconsider whether investing in firearms is an appropriate way for states and cities to cover the retirement costs of their workers. Since the shootings, officials of other public pension funds, including those in New York, Connecticut, Rhode Island and Massachusetts, have said they were searching their portfolios for firearms investments. But some of them have also expressed concerns about their fiduciary duties.

“We can’t manage the pension fund based on whatever the hot issue of the moment is,” said Thomas P. DiNapoli, the sole trustee of New York State’s pension fund for state and municipal workers in a radio interview.

He said he had found weapons holdings worth about $15 million, out of a $150 billion portfolio and was still deliberating over what steps to take. “There are big questions about gun manufacturers, and where we’re headed as a society,” he told WNYC.

In addition to the Freedom Group, the California teachers’ pension fund has investments in two other gun companies, Smith & Wesson and Sturm, Ruger, according to the fund’s chief investment officer, Chris Ailman. The amounts are small, about $12 million, out of a total portfolio of about $154 billion. But all three companies make guns that private citizens are not allowed to own in California, according to Mr. Ailman, who was asked to provide detailed information on firearms investments to the pension fund’s trustees.

The stocks of publicly traded weapons companies can swing sharply in response to news events. They fell after the Newtown shootings, leaving investors with losses and an uncertain outlook. Many pension investments in gun companies have been made through private equity partnerships, which usually run for many years and are hard to leave early without taking a loss.

Officials of several pension funds with stakes in the Freedom Group said that in keeping with the usual practice in private equities, they were not told in advance that their money would finance a firearms business.

The private equity company that owns the Freedom Group, Cerberus Capital Management, has already said it would sell the gun business and return to investors the money they had put into it. Cerberus said this would protect the investors’ financial interests while keeping them out of the gun-control debate, which it said in December was “more properly pursued by those with the formal charter and public responsibility to do so.” It added, “That is the job of our federal and state legislators.”

But one trustee of the teachers’ fund, California Treasurer Bill Lockyer, said state laws and the fund’s own investment rules necessitated a formal divestiture. He made the motion to design and execute a plan to divest of all companies that make guns that are illegal in California. When he was state attorney general from 1998 to 2006 he clashed with the National Rifle Association over the enforcement of California’s gun laws, which are widely seen as the most strict of any state.

The state teachers’ fund also requires its investment analysts to consider if a company makes a product so detrimental to human health “that it draws significant product liability lawsuits” and “avoidance by other institutional investors.” The rule was added in 2008, when the fund was divesting of tobacco interests. Mr. Lockyer said it was applicable to makers of large-capacity ammunition clips and assault weapons, which “pose extreme dangers to public health and safety.”

Mr. Lockyer also sits on the board of Calpers, California’s pension fund for state and municipal workers. He is expected to make a similar motion when that $243 billion fund holds an investment meeting next week.

An official of the Los Angeles pension fund for police and fire fighters said one of its trustees had also sought an evaluation of how its investment in the Freedom Group comported with its investment policies. The Los Angeles Police Department is also a customer of the company.

Connecticut’s treasurer, Denise L. Nappier, who is the sole trustee of that state’s pension fund, said the fund’s only stake in a weapons manufacturer was in Alliant Techsystems, which sells ammunition. But she said she was also looking for potential problems among companies that sell and distribute weapons.

New York City’s five pension funds — which were valued at $127.8 billion in September — contain nearly $18 million in weapons and ammunition companies, the city comptroller’s office said. The comptroller, John C. Liu, said in a statement that the funds “are reviewing their holdings in gun manufacturers and are considering all options, including divestment, to ensure that public pension dollars do not support weapons that can destroy a community in the blink of an eye.”

But other public pension funds, including those in Idaho and Texas, said they did not consider the investments an issue.

Julie Creswell contributed reporting.

http://www.nytimes.com/2013/01/10/business/california-teachers-fund-to-divest-of-gun-stock.html?_r=0

So this divestiture idea is moving from retirement funds to cities ~ GOOD! ~ Emanuel is active in Mayors Against Illegal Handguns and I'm betting this will pick up steam ~ I'm also calling my financial advisor today to make sure I'm not holding any gun stocks ~ Sooz

Chicago Mayor Orders All City Pension Funds To Divest From Guns
By Annie-Rose Strasser on Jan 14, 2013 at 9:37 am

On Monday, Chicago Mayor and former Obama Chief of Staff Rahm Emanuel announced that he has ordered all pension funds in the city of Chicago to divest their interests from gun manufacturers.

Speaking at a gun violence prevention event at the Center for American Progress Action Fund, Emanuel said that he hopes other mayors will follow suit:


The announcement comes just one day before Vice President Joe Biden is set to deliver to President Obama his recommendations for stronger gun laws. The suggestions will come from the opinions of a task force set up in the wake of the shooting at Sandy Hook Elementary School.

Emanuel has previously hinted that he would like to look at ordinances that prevent the sale of assault weapons, assault magazines, and that require background checks.

Chicago has been brought to the fore in discussions about stronger gun laws. The city has suffered immensely high rates of violent gun crime over the last year, with gun deaths for 2012 surpassing troop deaths in Afghanistan by the month of June.

http://thinkprogress.org/justice/2013/01/14/1442671/rahm-chicago-guns/

Fund managers can exercise their fiduciary duty easily without investing in guns.