We’re Not ATMs, Pensions Warn Politicians

Two of Europe’s biggest pension fund managers have called for direct dialogue with regulators and politicians to boost investment in the continent’s infrastructure and reinforce its economic recovery.

Policymakers at the European Commission have been trying to drum up support for the so-called “Juncker Plan”, a project designed to “mobilise investments of at least €315 billion” ($353 billion) for the continent’s “real economy” in the next three years.

PGGM and APG, which collectively manage roughly €625 billion for pension funds in the Netherlands, warned that institutional investors were not obliged to become “subsidising entities” for public spending.

“Whenever governments see the need for large investments, they tend to look to large institutional investors to supply the funds,” wrote Tjerk Kroes, director of group strategy and policy at APG, and Eloy Lindeijer, head of investment management at PGGM, in a newsletter to clients.

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“Whenever governments announce ambitious investment plans, the first reflex of institutional investors like APG and PGGM is to move out of earshot.” —Tjerk Kroes (APG) and Eloy Lindeijer (PGGM)The pair added that institutional investors “have not been created to fill the gaps in government budgets” and would only support the planned European Fund for Strategic Investments “if the actual risk-return profiles of the investment projects are at least as attractive as the best alternative”.

Kroes and Lindeijer pointed out that APG and PGGM already invest more than half of their collective assets within Europe, but would not increase this if it did not benefit their members.

“In other words, we do not feel entitled to take on the role of a subsidising entity, liberally supplying funds that have been entrusted to us by our clients’ participants,” they wrote. “Therefore, whenever governments announce ambitious investment plans, the first reflex of institutional investors like APG and PGGM is to move out of earshot.”

Kroes and Lindeijer said their funds would be open to exchanging non-European assets for European investments if policymakers could make investing in the continent’s markets and economy “genuinely more attractive”.

“With this in mind, APG and PGGM, as large institutional investors, stand ready to cooperate with the European Commission in accomplishing the optimal framework which will enable institutional investors to play their role in investing more in Europe,” they wrote, “on the sole, but non-negotiable, condition that this is done without jeopardising our clients’ ultimate goal, providing adequate pensions to their participants.”

“It is crucial that any policies arising from building a capital markets union take into account the characteristics of pension funds.” —PensionsEuropeLobby group PensionsEurope published a report this week urging policymakers behind the Capital Markets Union (CMU) to promote freedom of investment for long-term investors.

“The success of the CMU will depend on whether it will really facilitate long-term investments by pension funds in the European economy,” the report stated. “It is therefore crucial that any policies arising from building a CMU take into account the characteristics of pension funds.”

UK public pension funds expressed their frustration with the government’s approach to privatizing infrastructure at a National Association of Pension Funds conference last month. Mike Jensen, CIO of the Lancashire County Council pension, said it was “surprisingly difficult” to get UK politicians to engage.

NAPF Chief Executive Joanne Segars—also chair of PensionsEurope—suggested that ministers instead saw public pensions merely “as a useful ATM”.

The bench keeps getting deeper at the University of California’s (UC) investment office.

Financial risk virtuoso Rick Bookstaber has signed on to become the inaugural chief risk officer to the $91 billion pension, endowment, and working capital fund.

Bookstaber is to leave his post as a research principal at the Treasury Department’s Office of Financial Research to join the institution effective August 3, according to an internal UC email obtained by CIO.

“Rick’s various roles have put him at the center of some of the critical crises of the last three decades: Working with portfolio insurance during the 1987 crash while at Morgan Stanley, with the 1998 failure of Long-Term Capital Management while at Salomon Brothers, and with the aftermath of the 2008 crisis while in the regulatory sphere,” wrote UC CIO Jagdeep Bachher in a message to staff on Thursday.

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For more than 30 years, Bookstaber has specialized in financial risk management, holding senior positions on the buy-side, sell-side, and in the public sphere.

The New York Times called him “one of Wall Street’s ‘rocket scientists’” in a review of his 2007 book, A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation.

Bookstaber’s résumé includes some of finance’s most notable players. He has led risk management for Morgan Stanley (1984 to 1994), Salomon Brothers (1994 to 1998), Moore Capital Management (1998 to 2002), and Ziff Brothers (2002 to 2004). Following those roles, he launched a hedge fund (FrontPoint Partners) and spent a year managing risk for the world’s largest—Bridgewater Associates.

As UC’s chief risk officer, the email noted that Bookstaber will report directly to Bachher. Like the fund’s asset class heads, he will also hold the title of managing director.

This latest hire is perhaps the most high profile in a string of major talent acquisitions.

Two US public pension chiefs—Scott Chan, formerly of Sacramento County, and Sam Kunz, ex-Chicago Policemen’s Annuity and Benefit Fund—have traded the CIO title for managing director jobs with UC.

Bachher has also recruited senior staff from leading international asset owner organizations, including Ontario Teachers’, Norges Bank Investment Management, and his former employer, the Alberta Investment Management Corporation.

Earlier this month, US Vice President Joe Biden hosted Bachher and representatives from New Zealand and Alaska’s sovereign wealth funds, among others, at the White House to announce a $1 billion-plus commitment to clean energy innovation.

External Hires:

Rick Bookstaber, Managing Director, Chief Risk Officer (ex-US Department of Treasury)
Scott Chan, Senior Managing Director, Public Equity (ex-Sacramento County Employees’ Retirement System)
Arthur Guimaraes, COO & Associate CIO (ex-AIMCo)
Brian Gibson, Senior Investments Advisor to the CIO (ex-AIMCo and Ontario Teachers’)
Ashby Monk, Senior Advisor to the CIO
Sam Kunz, Managing Director, Asset Allocation & Investment Strategy (ex-CIO of the Policemen’s Annuity and Benefit Fund of Chicago)
Niclas Winterstorm, Director, Operational Risk Management (ex-Norges Bank Investment Management)
Lindsey Adams, Director, Real Estate (ex-San Francisco Public Employees’ Retirement System)
Jessica Hans, Senior Investment Analyst, Private Equity & Real Assets (ex-Monsanto and Blackstone)
Matt Webster, Senior Investment Analyst, Private Equity & Real Assets (ex-Chertoff Group)
Sheng-Sheng Foo, Senior Investment Analyst, Public Equity (ex-California Endowment, a $3 billion foundation)
Thomas Fischer, Investment Officer, Real Estate (ex-Otto Finlay Investment, a real estate operating company)

Promotions:

Cay Sison, Director, Real Estate (formerly Investment Officer)
Paul Teng, Director, Deputy Head, & Acting Head, Public Equity (formerly Investment Officer)
Edmond Fong, Managing Director, Cross Asset Class Investments (formerly in absolute return unit)
Susie Ardeshir, Investment Officer

Exits:

Lynda Choi, Managing Director, Absolute Return
William Coaker, Senior Managing Director, Public Equity (now CIO of San Francisco Employees’ Retirement System)
Mel Stanton, Deputy CIO (now retired)
Peter Taylor, CFO (now president of a private foundation)