Pension Funds vs. Buffett in Goldman Battle

US pension funds and other shareholders have aggressively sued Goldman Sachs in the wake of SEC fraud charges, but the Oracle of Omaha defends the bank's credibility.

(May 4, 2010) — Following the Securities and Exchange Commission’s fraud charges against Goldman Sachs last month, the banking giant has been hit with a flurry of shareholder lawsuits filed by US pension funds. Warren Buffett, on the other hand, defends the banking giant.

“I haven’t seen anything in Goldman’s behavior that makes it any more subject to criticism than Wall Street generally,” Berkshire Hathaway CEO Buffett has stated. As the investment bank fights for its reputation, Buffett has declared he has no plans to sell Berkshire Hathaway’s stake in Goldman.

Meanwhile, in a recent filing with the SEC, Goldman outlined seven legal actions that shareholders have taken against the firm since the regulator’s suit in federal count in Manhattan on April 16. The private lawsuits demand compensation from the bank, action against execs, and changes to how the firm operates. Goldman said it expected to have additional litigation in the future, while calling the SEC’s allegations unfounded.

According to Financial News, the Louisiana Municipal Police Employees Retirement System (MPERS) is a plaintiff in one of the suits. The Southeastern Pennsylvania Transportation Authority and International Brotherhood of Electrical Workers Local 98 Pension Fund are co-lead plaintiffs in another. The funds claim that Goldman’s trading business has been conducted unethically and assert that the SEC charge could threaten the Wall Street firm’s reputation in the long run.

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Goldman’s Chief Executive Officer Lloyd Blankfein has been busy launching a media offensive to restore trust with investors and the public. The CEO appeared on both The Charlie Rose Show and in an interview on CNN with Fareed Zakaria to defend the bank’s reputation, saying he would resign as CEO if he thought it would help the firm’s future. Some estimate that Goldman’s legal fees could reach up to $100 million.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

(May 3, 2010) — AFP Integra SA, Peru’s largest private equity pension fund, plans to raise its investment abroad in emerging markets, should the central bank increase its overseas holdings limit.

“We’re growing much quicker than the alternatives for investment locally,” de las Casas said to Bloomberg. “We want to diversify our portfolio and emerging markets look promising.”

According to the news service, Integra has upped its proportion of investments in foreign assets to 24% from 20% at the end of March as the global economy rebounds.

Greater returns on investment by Peru’s four pension funds, which manage $25 billion, have caused them to seek an increase in the limit on their oversees investments.

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The funds had 21% of their assets abroad as of March 31, up from 14% a year earlier, according to Bloomberg. Currently, 24% in overseas holding is the limit for private pension funds set by Peru’s central bank, but the central bank is poised to raise the cap on foreign investments to 26%, with foreign assets potentially climbing to 50% of the funds’ total investments.

Growth in emerging markets and developing countries is projected to be above 6.25% a year, following a growth of only 2.5% last year. The governments of many developing countries are working at maintaining a balance between domestic growth and moderating the inflows from investors abroad, which could contribute to inflation, the Financial Times reported.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742