AlternativesAugust 9, 2019

Despite State’s Hardline Stance, Tennessee Pension Holds Marijuana Stocks

Treasurer moves to sell after stock in IIP discovered in small-cap index investment.

Reported by Elijah Owens

A local newspaper discovered that the Tennessee Consolidated Retirement System holds more than $720,000 invested in a company in the marijuana industry, despite the state government’s hard-pressed agenda against the drug.

The Chattanooga-based Times Free Press reported that the pension had a passive exposure to Innovative Industrial Properties Inc (IIP), which buys medical cannabis-growing developments and subsequently leases the properties to licensed distributors, through an investment in the Standard and Poor’s S&P Smallcap 600 index.

Last month, CIO showed how widespread index use means even if pension funds are environmental, social, and governance focused, they often unwittingly are invested in stocks that don’t match that profile.

When the paper discovered the pension’s ownership of 7,009 shares, despite the government’s hardline advocacy against even medical marijuana laws, they brought it to the attention of Tennessee Treasurer David Lillard Jr., who said he was surprised to hear of the investment.

“I didn’t know we had this investment until the Chicago Sun-Times called up and we began digging around to find it,” Lillard said in an interview with the publication. He’s reported to have immediately called for the divestment of the pension’s holdings in IIP, a move that drew criticism from others due to the index’s positive performance.

IIP stock has more than doubled since the beginning of the year, from $46 on Jan. 1 to $103 on Aug. 1. The valuation peaked at $130 per share in early July.

The company’s year-over-year revenue increase as of March 2019 was 147%, and net income gained 285% over the same period, leaving the pension with the decision whether to prioritize its fiduciary responsibility or its alignment with the current administration’s political agenda.

Republican Rep. Jeremy Faison said, “I want our state employees and the people invested in the TCRS to be able to get an excellent return on their investment. If we’re getting in the game, why would we stop if there’s a way our state employees can get a better return on investment?”

“It’s contradictory and confusing to the public for the state to be invested in a marijuana company when we haven’t expounded a position that we currently support it,” State Senate Finance Chairman Bo Watson countered.

“I think it’s appropriate that the treasurer is selling the stock,” he added.

Lillard said the state needs to review its investment processes to avoid such a mix-up in the future. Media representatives from Lillard’s office did not respond to questions by press time.