Labor Department Investigates 3M Pension Plan

The US Department of Labor has launched an investigation into manufacturing and technology giant 3M’s $19.7 billion pension plan, the company revealed in its most recent quarterly report.

In its filing with the SEC, 3M said the Department of Labor notified the company in April 2015 that it had launched an investigation into the company’s pension plan pursuant to the federal Employee Retirement Income Security Act of 1974 (ERISA). The Labor Department told 3M the investigation relates to certain private equity investments, plan expenses, securities lending, and distributions of plan benefits.

The company said that in response to Labor Department requests, it produced documents and made employees available for interviews. It also said that in December 2016, the Department of Labor issued certain subpoenas to 3M and 3M Investment Management Corp. relating to the investigation.

“3M has produced additional responsive documents and is cooperating with the DOL in its investigation,” the company said in its filing. The Department of Labor has not provided a timeline for the completion of its investigation.

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The investigation could involve a rule the Department of Labor issued in April 2016, which expands the types of retirement advice that is covered by fiduciary protections under ERISA. The rule is designed to prevent conflicts of interest that could lead advisers to recommend high-fee investments for retirees.

Although the rule was first announced last year, it didn’t become effective until April 2017. The Department of Labor said the new rule was intended to ensure that advisers provide advice that is in their clients’ best interest.

When it announced the new rule last year, the Labor Department said in a statement, “If advisers and firms do not adhere to the standards established in the exemption, retirement investors will be able to hold them accountable, either through a breach of contract claim (for IRAs and other non-ERISA plans) or under the provisions of ERISA.”

However, because the investigation predates the new rule, it couldn’t be the initial reason for the inquiry.

Tags: 3M, ERISA, Labor department, Pension Plans

Investment firms owned by women and minorities run just 1.1% of the trillions of dollars overseen by the global asset management industry, according to a report issued this week by the James S. and John L. Knight Foundation.

While it’s no surprise that white men dominate the investment industry, the Miami-based Knight Foundation commissioned a study to determine just how much – or how little – women and minorities participate in asset management. The report was authored by Josh Lerner of Harvard Business School and three researchers from Bella Research Group, an advisory firm Lerner runs.

They found that women-owned mutual funds control just 0.9% of assets under management, while minority-owned mutual funds control just 0.3% of assets. Among real estate funds, women-owned companies control just 0.3% of assets and minority-owned firms hold 1.5% of assets.

In the hedge fund industry, firms owned by women and minorities hold less than 1% of all assets, Lerner found. In private equity, the figure is less than 5%.

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“Despite the potential economic and social benefits of utilizing diverse asset managers, the industry is afflicted by a lack of diversity,” Lerner wrote in his report.

Among types of institutional investors, private pensions, insurance companies, and foundations and endowments tend not to use women and minority managers. Public pensions, on the other hand, are more likely to use non-white managers, perhaps a reflection that public pensions often strive to invest in a socially responsible manner.

Even as investors use mostly white men as money managers, the decision seems not to be a function of performance, the study said. The study found no significant differences in investment returns for women and minorities compared to white male managers.

The global asset industry totaled $71 trillion of assets under management as of 2015, Lerner said. He lamented the lack of transparency about the racial and gender makeup of investment firms.

“We highlight the need for data sources with comprehensive and detailed reporting of diverse ownership and diverse management,” Lerner wrote. “This demographic information is most notably absent in the PE and real estate spaces. Creating a publicly available, non-proprietary database with this information should be a top priority for the investment community.”

Tags: Diversity, investment industry, John L. Knight Foundation, women