The Globe’s report on the Massachusetts fund comes at a time when Congress is considering a bill that would force the pension fund to dump investments in companies doing business in Sudan.
The newspaper also found that the fund has $383 million in investments in Iran, which is not yet a target of legislation restricting investments.
Federal law forbids US firms from doing business in Sudan or Iran, but no such restrictions apply to foreign firms, in which state pension funds are permitted to invest, according to the Globe. The investments of state pension firms are, however, subject to parameters that state legislatures set.
The Massachusetts state worker fund’s investments are heavily weighted in foreign oil firms, with $119.9 million in Royal Dutch Shell and $33.3 million in PetroChina, which operate in both Sudan and Iran.
“You hire us to make you money, and when you restrict our ability to pick stocks, you likely will restrict our ability to get returns,” said Michael Travaglini, the executive director of the Pension Reserves Investment Trust, which is comprised of state officials who run the state’s worker fund for more than 480,000 active and retired state workers, according to the Globe. He said, however, that the fund would defer to a legislative ban against such investments.
According to the Globe, the return on investments in Sudan have been 10.7% during the last decade, which ranks above the 8.8% median return among all public pension funds in the US during the same period. A number of states and individual pension funds have taken up measures to divest holdings in companies doing business in the violence-ridden region in protest.
The California Public Employees’ Retirement System voted in May to bar investments in nine corporations doing business with the Sudanese government, even though it has no holdings in the companies (See CalPERS Votes to Bar Sudan-related Investments). California’s teachers retirement system said it would dump its $12 million in holdings in five companies with connections to the Sudanese government (See CalSTRS Approves Sudan Divestment).
A few states, including Maine (See Measure Requiring Sudan Divestment Passed in ME), Illinois ( Illinois Measure Bars Sudan Investments), Connecticut and New Jersey (See New Jersey Assembly Bans State Investment in Sudan ) have also passed laws to bar some investments in companies that do business in the country.
One debate has been, however, whether withholding investments in companies that do business in Sudan will do anything to hurt those companies targeted. According to the Globe investigation, the companies do not believe that dumping investments will do much.
Robert Rotberg , a South Africa specialist at Harvard’s Kennedy School of Government, told the Globe, “Divestment is usually a way of showing public distaste for a regime. That’s what happened in South Africa. But the economic impact is somewhat less … It didn’t change the structure of South Africa’s economy or deprive it of needed capital.”