What Would a US Shutdown Mean for Investors?

(September 30, 2013) – As politicians play chicken on Capitol Hill, the US Securities and Exchange Commission (SEC) has detailed how it intends to keep investors safe during the disruption.

All leave is cancelled for SEC staff should Congress fail to agree measures to prevent funding being pulled from government services, a move that would see non-essential federal offices face closure and employees side-lined or working without pay.

Investors in US markets can take heart, however, as monitoring of securities trading—and those carrying out this business—is not deemed “non-essential”.

In a memo, the SEC said market monitoring and surveillance teams would continue to “perform market watch activities and monitor market technology operations”.

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Investors may also be cheered that this department is to “monitor any broker-dealers reported as being in financial distress; money market fund surveillance and monitoring; and monitor any international market developments that might impact the US”.

Any unscrupulous market participant shouldn’t think they would get away with pulling any tricks in the event of a shutdown—the SEC is ready.

The agency’s Law Enforcement/Litigation team will be on hand to “handle emergency enforcement matters, including temporary restraining orders and/or investigative steps necessary to protect public and private property; monitor the commission’s ‘tips, complaints, and referrals’ system and web-based investor complaint system and process referrals from self-regulatory organizations and others to identify matters that are emergencies and take follow-up steps relating to such emergencies; on-going litigation that cannot be deferred where there is a threat to property; and emergency examinations and inspections to protect public and private property”.

However, those of you who are excited to see the final version of the Dodd-Frank Act may have to bide your time.

All writing of “non-emergency” legislation would be brought to a halt, should the government fail to reach consensus, the SEC said, and firms looking for the agency’s approval to start gathering or trading assets would also have to wait.

International governments may have to hold on too. Under the “discontinued” list featured: “Non-emergency assistance to foreign authorities under bilateral or multilateral arrangements; and participation in multilateral organizations and working groups.

For a full run down of the SEC potential disruptions of service, click here.

(September 30, 2013) — The Teachers’ Retirement System of Louisiana (TRSL) has revealed its peer-beating cost reduction exercises have saved more than $7 million in fees.

Following analysis by the Toronto-based CEM Benchmarking—which compared TRSL against similarly sized US pension systems in the areas of investment performance and pension administration—TRSL was found to have saved $7.2 million, primarily because it has been able to negotiate lower investment management costs.

In addition, TRSL’s administration cost per member was $88 compared to its peer average of $96 during fiscal year 2012.

It also outscored most of its peers on customer service, driven in part by years of investment in its online self-service platform for members and employers.

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TRSL Director Maureen Westgard said the she thought hers was the only retirement system in the state which operated with such a rigorous third-party assessment, but that the results were paying dividends.

“It’s truly a 360-degree view of everything we do in our investment of assets and our processing of retirement benefits. We use the results as a tool to ensure we manage our resources efficiently and effectively,” she said.

The challenge of negotiating fee levels has gathered pace in recent months: a study by MSCI in July found corporate defined benefit pension plans were putting more pressure on providers to lower fees than their public sector counterparts.

Fee dispersion—the spread between fees paid at the 90th and 10th percentiles for mandates between $50 million and $100 million—showed the most variance, with large cap core managers seeing their prices move by as much as 50 basis points.

Small cap core came next with 45 basis points, while large cap value fees were one of the most consistent, with a dispersion of 23 points.