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Report says some big public pension funds imitate activist investors

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November 29
4:28 AM 2013

A report on The New York Times' The Dealbook said some of the largest public pension funds in the country are imitating the actions of activist investors like Daniel Loeb, Carl Icahn and William Ackman. They engage with and sometimes even look to throw out the directors of the firms where they own stock, the report said.

According to Anne Simpson, the board coups this year, which resulted to the exit of directors at Hewlett Packard, Occidental Petroleum and JPMorgan Chase, showcased the evolution of shareholder activism. Instead of being barbarians at the gate, they are now acting like owners, the Director of Corporate Governance at the California Public Employees' Pension Fund said. With USD 279 billion in assets, the California Public Employees' Pension Fund is the biggest US pension plan.

The report also cited what the second biggest public fund in the country did to Timken Company. Together with activist fund Relational Investors, the USD 176 billion California State Teachers Retirement System co-sponsored a proposal to split the steel and bearings maker. The funds saw issue with the three of the eleven board seats held by the founders the Timken family even if they only hold 10% of the company's stock. The proposal won a 53% vote, which prompted Timken to agree to a breakup two months ago.

Calpers is also another public fund that has led or supported shareholder revolts in companies like Chesapeake Energy, Massey Energy and Nabors Industries. Lawyer Ira M. Millstein finds it significant that the country's largest pension fund is taking an activist role and telling companies that are not doing well that they ought to change.

Meanwhile, CalSTRS Director of Corporate Governance Anne Sheehan said pension fund activism and engagement has increased because the financial crisis caused everyone's portfolios to lose a lot of value. Sheehan said, "As universal owners, how can we not assert our rights and develop a relationship with companies in our portfolio?"

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