CTPF Watchlist

Chicago Teachers Pension Fund Starting to Ask Questions

By Jim Vail

Trustee Victor Ochoa wants more accountability for money managers.

An interesting discussion was taking place when I tuned into the Chicago Teachers Pension Fund (CTPF) board meeting in December.

It revolved around holding the Pension Fund's money managers accountable, especially when their performance levels are low, and they do not represent minorities.

"We're here to make money to get our pensions," said Teacher Trustee Victor Ochoa. "We want to make sure it's there when we retire."

CTPF has a watch list of certain money managers including Ariel Investments and Lazard who are losing money for the fund and have been on the watch list for a while. While some Trustees support Ariel because it is a minority-owned local investment company, Ariel President Melody Hobson who may become the next CEO also sits on the board of directors of Starbucks which has been behind a brutal union-busting campaign that the Chicago Teachers Union called out. 

She has also suggested that if she takes over the company they could move out to San Francisco. 

The concern was raised about minority money managers that are not in compliance with the EEOC policies. While certain managers can claim they have a certain number of minority employees, where do these employees work. Are the minority employees just maintenance workers or secretaries versus higher up level investment managers.

"The people on this watch list are a concern to me and they don't have diversity," Ochoa said. "Then you question that and they don't have an answer." 

CTPF has invested a lot more money with Lazard, who is not minority-owned, versus Ariel, who is minority-owned. 

There has been talk that the Pension Fund will take action at its next board meeting concerning the watch list.

According to Crain's, Ariel has hit rock bottom in year to date performance. 

Ariel became a leading black-owned investment company and one of the few significant mutual fund firms from Chicago. The current CEO John Rogers said he would like Melody Hobson, who is the chairman of Starbucks Board of Directors and married to Star Wars Founder George Lucas, to be the next CEO. 

Ariel has powerful Chicago Machine connections to the unions whose pension money they are investing, and despite prior poor performance, they continue to hang on. Former Chicago Public Schools Chief Arne Duncan who declared war on the public schools and the CTU with his turnaround model sits on Ariel's Board of Directors.

The topic was "CTPF Discussion of Investment Manager Diversity and Brokerage Goals" at the Dec. 15 board meeting. 

"We reviewed our policy and the watchlist, and failure to make goals is considered a factor when rating a manager," Chief Investment Officer Fernando Vinzons told the Board. "This could lead to termination."

However, Vinzons was careful in the words he used, stating they would use "a little bit of of punitive action."

"We look at everything, what actions we can take for managers on the watch list," he said.

Members First Teacher Trustee Victor Ochoa spoke up forcefully in holding money managers accountable.

"I think this is something we have to enforce, we can additionally talk to AFT and put our heads together, we don't want people to remain on the watchlist indefinitely," he said. "That's up to us to say enough is enough. We don't want to endanger our fund. I am a fan of democracy as messy as it is. I think we did things right to get rid of carbon fuels. But we don't want to hurt ourselves. We want to make sure they have diversity at all levels." 

CORE Teacher Trustee Quentin Washington agreed.

"If I could piggy back on that, there is a lack of diversity and even those people are on the watch list," he said. "It concerns me that people on the watch list and they don't have diversity. We're here to make money so we can get our pensions."

VP Trustee Jaqueline Price-Ward said she is happy to hear the new trustees elected talk about the importance of having minority money managers, but also holding people accountable.

"We have got to hold people accountable," she said. "I think it's insulting and disrespectful managing our money and not meeting diversity, but your'e grinning and smiling at us. We have to enforce. If we cut off one or two heads everyone will get in line. I'm so glad to see new trustees on the board get this."

The one trustee who preached caution when looking closely at performance and minority status was former UPC now CORE Retired Teacher Trustee Mary Sharon Reilly. She said she does not want to see anyone get fired. She also noted that the Pension Fund does not see the managers report out like they used to in the past so that the Fund is kept up to date.

It's one thing to talk the talk. We will have to see how these trustees vote and whether they are serious about removing money losing managers from a Pension Fund that is only about 45 percent funded and has been losing a lot of money lately.