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NJ, Phila pension data rules advance (Update)

NJ law to ban pension managers' political contributions advances

(UPDATE) Thursday p.m., NJ ban on campaign donations by state investment contractors to national political action committees and order that the state start reporting fees to private managers (S-2430) approved by NJ Senate, 25-8, see below.

EARLIER:  Wednesday, over the opposition of Mayor Michael Nutter's appointees, a majority of the trustees of Philadelphia's $4.8 billion city pension plan have agreed to "request" dozens of private firms that are paid to manage city money -- from giants like KKR and Barclays to local investors like Ted Aronson's AJO Partners -- to "disclose their political spending," and will send current and future managers campaign finance disclosure requests, starting Jan. 1.

The move was cheered by city controller Alan Butkovitz, who had recommended this disclosure, noting the city has previously urged similar disclosures by the publicly-traded companies it invests in. "We will be asking for all donations from everybody," including federal and state as well as city contributions, Butkovitz told me in a statement. Read the resolution here. 

The four trustees representing city police, fire, white-collar and blue-collar workers joined Butkovitz in supporting the disclosure request, outvoting Nutter's vote-no faction.The move follows the Securities and Exchange Commission's first-time-ever order that a private money manager, Wayne-based TL Ventures, return $300,000 in state and city pension fees after founder Robert Keith gave cash gifts to Pa. Gov. Tom Corbett and Philadelphia Mayor Michael Nutter while getting paid to manage state and city pension funds, in violation of a 2010 federal law limiting contributions to officials with influence over pension boards.

In New Jersey, State Sen. Shirley Turner, D-Ewing, has introduced a bill that would go further: banning that state's pension fund from hiring money managers who give money to politicians. She cited my Sept. 2 column noting that New Jersey managers are already banned from giving to state political groups -- but remain free to finance federal committees like Gov. Chris Christie's Republican Governors Association. Turner also cited reporter David Sirota's International Business Times reports detailing the hiring of political donors by the state pension fund. Christie has insisted NJ only hires managers based on their merit.

Banning all political donations would "basically shut down" New Jersey's multibillion-dollar investments in hedge funds, buyout funds, real estate and other "alternative investments," as the state Investment Council director, Christopher McDonough, told my colleague Andrew Seidman, per my Oct. 6 column here.

"That would be a good thing, in my opinion," Sen Turner told me after her bill passed a Senate committee, 3-1, last week. "I was very opposed when this whole idea cropped up in the Corzine administration," when hedge fund manager and Democratic donor Orin Kramer led a move to hire private firms to invest in "alternatives. I opposed that. I had this feeling it would be a slippery slope. They continue putting more money in these hedge fund managers' hands. The notion was that our pensions were so severely underfunded and we should swing for the fences for a higher riskand a higher reward. I don't think we should be taking higher risks with our workers' pension money."

Turner added,  "The state caused the underfunding. The fund was doing very well without these private managers. And it's costing us a lot of money, $400 million in (annual) fees. And there's no transparency or accountability. We need to know exactly how much these managers are making and how much they are charging. It should be done quarterly.

"And they should not be kicking back, paying back to political organizations. There should not be a hint of favoritism or pay to play. It's the employees' money. And it's not our private portfolio. We need a firewall between the investment of the pension funds and politics."