Companies Should Pay Better, Survey from Paul Tudor Jones Group Says

Improved pay is the top priority of Americans in finding means to make companies create a better economy that benefits more people, according to a poll by Just Capital, a group funded by hedge fund honcho Paul Tudor Jones.

In the poll, paying a “fair” or “living” wage was the choice in 12.2% of the respondents. Wages growth has nosed up recently, but still lags way behind where it would’ve been if earlier eras’ norms for raises had been in effect. The General Motors strike centers on restoring such lost income.

Just Capital asked more than 96,000 Americans what companies can do, as it said in a statement, to “restore declining trust and create an economy that works for more Americans.” The biggest poll finding was that companies must “invest” in their workers.

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Treating customers and communities well—which is described as “stakeholders” —placed second and third. Helping the environment was fourth, and “serving shareholders through good governance” was fifth. Note that the shareholders part is attached to the idealistic goal of better governance, something dear to the heart of corporate activists. (Just surveys also make clear that the public also cares about the more traditional capitalist objective of making a profit.)

The poll findings mirror a recent statement from the Business Roundtable, comprised of chief executives from the largest US companies, that the purpose of a corporation no longer should be confined to advancing the interests of its shareholders alone. Instead, the group declared, it must deal ethically with others, boost employees’ lots, and protect the environment.

Billionaire Jones formed Just Capital to promote this notion. In addition to its surveys, the organization sponsors an exchange-traded fund that invests in companies it considers to be “just.” Jones also is the founder of the Robin Hood Foundation, an anti-poverty charity.

The commission is ultimately trying to establish a portfolio that would limit the probability of the state retirement system’s funding level falling below 50% during the next five years to around 15%. It’s also looking to maintain at least three times the annual benefit payment amount in assets in a recessionary scenario.

To help with this, NEPC is suggesting the SIC exploit the flexibility of stock options to provide an additional layer of insulation from market swings. An average options portfolio beta of between 0.4-0.7 indicates a slight drag during an equity market uplift, but carries some attractive risk-mitigating characteristics in the event of a stock sell-off.

Capturing volatility risk premia through the sale of options would provide an additional diversifier to the SIC, which the consultant noted “has proven to be fairly consistent over time and in some ways is similar to earning a coupon.”

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The proposed allocation presented in the NEPC report sees a new segment for options that makes up approximately 5% of the portfolio, and is anticipated to generate a 4.8% five- to seven-year return.

For emerging markets debt, NEPC proposed the asset class for its ability to offer attractive yields relative to the rest of the world. It would provide a nice diversifier to the SIC’s current liquid credit exposure that’s heavily concentrated in the US, NEPC said.

NEPC said the asset class would “produce a high and stable income return stream to help mitigate the system’s negative cash flow and reduce the need to sell portfolio assets to meet required benefits.” The NEPC’s report proposed a 2% allocation to the asset class.

CIO recently held a discussion with Air Canada Pension Plan executives Vince Morin and Tarik Serri, who explained how they are taking advantage of newly enacted legislation in India that has opened up the doors for lucrative private credit strategies in the country.

The SIC and NEPC will review an additional analysis during their October 30 meeting and plan to seek approval of an optimal mix.

Companies Should Pay Better, Survey from Paul Tudor Jones Group Says

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