CalSTRS Statement on Cerberus Firearms Divestment
WEST SACRAMENTO, Calif. – CalSTRS shares the frustration and concern of educators who want to see our fund completely divest from firearms.
In April 2013, the Teachers’ Retirement Board committed to divest from companies that manufacture firearms illegal for sale in California. Within months of the decision to divest, CalSTRS eliminated $3 million in public equity stocks from Smith & Wesson and Sturm Ruger and no additional such investments have been made. These are all actions we could take unilaterally.
At that same time, CalSTRS’ private equity partner, Cerberus Asset Management, publicized its intent to sell holdings of Remington Outdoor, formerly Freedom Group. Although Cerberus committed to sell its holdings in Remington Outdoor, thus far that pledge has not been fulfilled. As we continue to push them on this front, we have also worked to exercise patience and give them time to execute what is a complicated transaction.
But we understand the patience of our membership wears thin. Unfortunately, as a limited partner in a private equity investment pool controlled by Cerberus, CalSTRS has very limited rights. Contractual obligations and legal constraints severely limit our options to exit this investment.
More importantly, we cannot take unilateral action, in this case, to remove a specific company from an investment pool. Nor can we expose the fund by prematurely or imprudently selling about $375 million worth of holdings at a loss without thoroughly exhausting all other options first. While we cannot share the details, we want to make it clear that all potential options are being fully considered and have been for some time.
As a result of our decision to divest, CalSTRS now includes provisions in new private equity agreements that exclude firearms subject to divestment and offers CalSTRS an opt-out option if such investments occur. CalSTRS does not have any other firearms holdings with Cerberus.
CalSTRS has been the most vocal pension fund in the nation about divesting firearms and we remain very committed to this action. As the legal fiduciary for 879,000 California educators and their families, CalSTRS has a responsibility to conduct due diligence in all its investment decisions. CalSTRS believes our actions should uphold the values of our members and the policies by which we hold ourselves accountable.
Rest assured that we continue to push this issue and remain steadfast in our effort to eliminate our exposure. We will keep our membership updated on our progress and hope to have something to report soon.
The California State Teachers’ Retirement System, with a portfolio valued at $190.8 billion as of February 28, 2015, 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. CalSTRS also provides disability and survivor benefits. CalSTRS serves California’s 879,000 public school educators and their families from the state’s 1,700 school districts, county offices of education and community college districts.