Retirement insights from a Colorado PERA perspective

Inside Colorado PERA

Investment Stewardship: Advocating for Stronger Markets

investment stewardship

Over the summer, Colorado PERA
released its 2019 Investment stewardship Report, which demonstrates how PERA’s commitment to cost-conscious investment strategies and investment decisions that consider a range of factors preserves the value of contributions to the plan for the longterm
and protects the plan’s financial sustainability for generations to come.

Given its size
and reputation, PERA knows it can have a meaningful impact in creating
financial markets that are designed for the benefit of all investors. PERA’s
advocacy is rooted in three principles:

  • Fairness – markets should treat all
    investors in a fair and equitable manner.
  • Alignment – company success in the long run
    depends on aligned interests of companies and investors.
  • Disclosure – investors deserve
    robust, accurate information about financial and operational results of the
    firms in which they are owners and creditors.

Fair and
equitable markets are in the best interest of PERA members. Staff and PERA Board
members participate in advisory and advocacy groups in order to develop, share,
and promote best practices for improving global capital markets for all
investors. In fact, PERA holds seats on 223 different advisory boards to
promote ethical and professional practices in the industry and on the majority
of its private investment funds.

PERA Executive
Director Ron Baker serves on the
Board of Directors of the Council of Institutional Investors
(CII) and, in
2018, PERA collaborated to create and co-sign letters regarding shareholder
rights.

Other advisory
groups in which PERA is involved, such as the Sustainable Accounting Standards Board (SASB), the Harvard Law
School Institutional Investor Forum
(HIIF), and the University of
Colorado Burridge Center for Finance
promote stronger investment practices and more
efficient markets. SASB, for example, develops standardized metrics that help
investors analyze a company’s ability to operate sustainably, which PERA
believes will have considerable impact on how the investment industry thinks
about the financially material aspects of sustainability in the future.

Ideally, company
interests are aligned with investors’ interests through sound corporate
governance. However, there is an-ever present temptation for management to act
in ways that benefit themselves over their investors, harming the returns of
their investments and impacting shareholder value. To keep companies’ interests
aligned with those of PERA and other investors, staff directly engage with
corporate management and look for partners with a track record of strong
corporate governance.

Staff also review
external managers, analyze management track records, and vote by proxy as the
shareholder of investments made on behalf of PERA members and retirees.

As an institutional
investor, PERA depends on accurate and timely information from companies in
order to assess and project the overall performance of its investments. Yet,
there are clear gaps in the availability and quality of financially material
disclosures. This is why PERA supports developing and promoting transparent,
accurate disclosures of companies’ operations and financial positions.

Calculating the
financial impact of environmental sustainability is an example of intangible
asset value that is hard to measure. That’s why PERA supports SASB’s efforts to
develop standardized metrics to help investors analyze a company’s
sustainability.

Advocating for strong corporate governance and fair, equitable
markets is another critical
component of PERA’s investment stewardship philosophy. More on PERA’s four-part
stewardship approach is available here.

StewardshipThe practice of overseeing or managing something entrusted to one’s care. PERA’s approach to investment stewardship is focused on ensuring the financial sustainability of the fund that pays benefits to retirees and beneficiaries.StewardshipThe practice of overseeing or managing something entrusted to one’s care. PERA’s approach to investment stewardship is focused on ensuring the financial sustainability of the fund that pays benefits to retirees and beneficiaries.StewardshipThe practice of overseeing or managing something entrusted to one’s care. PERA’s approach to investment stewardship is focused on ensuring the financial sustainability of the fund that pays benefits to retirees and beneficiaries.

Comments

  1. Arthur Brown says:

    Unfortunately, I see much about political socially correct investment and little about goals to achieve the best return on investment possible. In my 65 years of experience, mostly in the private sector with the last dozen or so years in the public sector, this may explain PERA’s history of finanical problems. I encourage the Board of Directors to shift policy away from so much focus on political and social factors, which I have found can be high risk – low return and more toward a financial and results oriented focus on return on investment commensurate with acceptable financial
    risk.

  2. Bill says:

    PERA Board of Trustees:
    See link below
    Please be more conservative with investment of PERA funds: perhaps switch (flip) investment allocation of fixed income and equities? More fixed income and less equities.
    Thank you,

    https://www.pbs.org/wgbh/frontline/film/the-pension-gamble/

    • PERA on the Issues says:

      Bill, thank you for your feedback. The PERA Board of Trustees will be conducting an Asset/Liability study at its planning session later this month, which helps determine the level of risk that is appropriate in the context of liabilities. We will share any resulting changes (if any) to PERA’s asset allocation in future editions of PERA on the Issues. ~Jeff

  3. Steve says:

    How can we trust that PERA really has the “eye” for good stewardship when it immediately failed to meet its own projections following SB200, and we are already entering the adjustment phase where members will be paying more or losing cost of living adjustments (aka the “AI”) more than had already been expected due to SB200?

    I find it kind of shocking and embarrassing that this grand proposal, this *30 year plan* to put PERA on track to full funding, which no doubt cost quite a bit of money to put together, lasted about 6 months before PERA has already fallen behind.

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