Make Advisors Accountable, CalPERS Urges DoL

The California Public Employees’ Retirement System (CalPERS) sent an open letter to the Department of Labor urging it to adopt a controversial fiduciary standard for retirement investment advisors.

The proposal—advocated by the Obama administration—would not directly apply to CalPERS, which is already a fiduciary for its 1.7 million members. Extending that level of responsibility to advisors reflects the $300 billion fund’s core philosophy, it told Department of Labor officials.

“CalPERS believes that fiduciaries should be accountable for their actions, and must transparently perform their duties to the highest ethical standards,” Ann Boynton, CalPERS’ deputy executive director of benefits policy, wrote to the federal labor department.

“The proposed rule appears to align with CalPERS’ beliefs on fiduciary responsibility and we support the department’s efforts to ‘safeguard plan participants by imposing trust law standards of care and undivided loyalty on plan fiduciaries,’” Boynton continued, quoting language from the proposed legislation.

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The pension official highlighted the more than 40 million American families with assets in individual retirement accounts—their aggregate balance totaling upwards of $7 trillion. This population, she said, continue to be vulnerable to self-serving investment advice as long as the industry does not have to disclose any conflicts of interest.

Failure to implement the rule, according to CalPERS, could cost individual investors up to $1 trillion in retirement savings over the next 20 years.

“The proposed rule appears to be congruent with CalPERS’ belief that all Americans should have effective means to pursue retirement security,” Boynton concluded.

Two of Sweden’s national pensions have collaborated with asset manager TIAA-CREF to create a €2.2 billion ($2.5 billion) real estate joint venture.

AP1 and AP2—which between them run roughly €57 billion within Sweden’s national pension system—and TIAA-CREF aim to invest a further €2 billion into real estate through the arrangement in the next three years.

The two pensions first pooled their resources in 2011, creating Cityhold Property AB. Since then, the funds have bought six “core” assets. The new vehicle—known as Cityhold Office Partnership—replaces this and adds nine properties owned by TIAA-CREF in the UK, France, and Germany.

New investments will target core investments in these countries as well as “value-add” opportunities in other major European cities.

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Johan Magnusson, CEO of AP1, said a larger pool of capital would present better opportunities for long-term investment in commercial property. AP2’s CEO Eva Halvarsson added that the arrangement has “successfully enhanced and diversified the portfolio of European real estate in line with the strategy originally outlined for the company”.

TIAA-CREF subsidiary TH Real Estate manages the vehicle. Jasper Gilbey, director at TH Real Estate, said the venture’s target markets were selected “on the basis of their long run structural trends”, including demographics, technology, and sustainability.

The Swedish funds’ expansion of their property investments comes as Norway’s sovereign wealth fund is ploughing 5% of its €724 billion portfolio into real estate. The Government Pension Fund—Global had 2.7% invested in the asset class at the end of June, according to its second quarter report. The allocation posted a 2% return in the second quarter, while the fund’s equity and bond portfolios both lost money.

Next month’s edition of CIO Europe carries an interview with AP1 CIO Mikael Angberg covering infrastructure, collaboration, and the fund’s Innovation Award-winning governance processes. Sign up now to receive your copy.