CalSTRS Releases Statement on Investments in Firearms Manufacturers

Statement Ricardo Duran

WEST SACRAMENTO, CA – The California State Teachers’ Retirement System (CalSTRS) released a statement today regarding its investments in private equity funds managed by Cerberus Capital Management that are invested in the Freedom Group, which manufactures firearms:

“The tragic and devastating acts that took place December 14 at Sandy Hook Elementary School in Connecticut have prompted many in this country to call for change: To determine what we can do differently to help ensure the unthinkable never happens again.

“In our case, CalSTRS investment staff immediately began reviewing our investments in private equity funds managed by Cerberus Capital Management (Institutional Series Three and Series Four) that are invested in the Freedom Group, which manufactures firearms. Our investments staff also initiated discussions with Cerberus to learn more about the facts surrounding the investments.

“This morning, Cerberus Capital Management issued a statement noting its intent to immediately engage in a formal process to sell its investment holdings in the Freedom Group.

“Cerberus is a multi-strategy private equity firm. They invest in a wide variety of firms and strategies; Financial Services, Healthcare, Consumer & Retail, Manufacturing & Distribution, Building Products, Energy & Natural Resources, Apparel, Paper, Packaging & Printing, Transportation, Industrial & Automotive, and Travel & Leisure.

“CalSTRS first invested in Cerberus Capital Series 3 in 2003, and again in 2007 in Cerberus Capital Series 4 as part of the core Private Equity program. The Freedom Group represents a very small investment within these funds. CalSTRS owns 2.4 percent of Freedom Group, not 6.67 percent as reported by some media outlets.

“CalSTRS has established a thorough vetting process for potential investments that seeks to test not only their financial potential, but their social, human and environmental impacts as well. In fact, current policies require that the risks associated with products that pose significant threats to human well-being be taken into account before an investment is made by CalSTRS investment managers. They are outlined in CalSTRS 21 Risk Factors, which we adopted in 2008 after our investments in Cerberus.

“Moving forward, CalSTRS will work to ensure that all of our investments are taking these very important criteria into consideration.”

The California State Teachers’ Retirement System, with a portfolio valued at $154.8 billion as of October 31, 2012, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans, as well as disability and survivor benefits. CalSTRS serves California’s 856,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.