US gun control debate shaping CalSTRS' allocation

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The Sandy Hook elementary school shooting in the US was a 'tipping point', says CalSTRS corporate governance director Anne Sheehan, which has led the US pension fund to seriously review its policy on gun makers.

The California State Teachers' Retirement System (CalSTERS), one of the US’ largest pension funds with over $150 billion in assets, is the country's first public pension fund unaffiliated with religious or political organisations to speak out on investing in gun makers .

'This incident at Sandy Hook was a tipping point, a watershed event in terms of looking at the ownership of these companies in our portfolio', said Sheehan.

'Guns hadn't been discussed before. We have members of the board who are hunters and who own guns at home and go shooting. It's legal.'

Through its investment in the private equity firm Cerberus, CalSTRS owns 2.4% ($8.8 million) of Freedom Group, a company that manufacturers assault weapons similar to those used in the attack. Cerberus has already announced it is selling the firm, leaving CalSTRS unexposed.

Sheehan said the US pension fund will also divest from its $1.1 million share in Smith & Wesson and its $1.8 million share in Sturm Ruger following a policy decision by the board to begin divestment in companies that manufacture weapons that are illegal in California.

'We have to think about how the exposure carries financial and reputational risk for us. The board felt that we have to go to these companies and identify whether they are potentially coming under this risk', said Sheehan.

Over the past five years, the fund has taken similar measures regarding tobacco companies and excluded them from their portfolio due to such risks.

Exposure to gun makers is considered an even greater risk following US President Barack Obama's policy proposals that include the banning of military-style assault weapons and high-capacity magazines, announced in a press conference last week.

It is expected that CalPERS, the Californian state pension fund, will announce whether they too will be looking to divest in certain gun makers at their next board meeting in February.

'We've been speaking to CalPERS regularly and they have been very keen to follow our divestment process', said Sheehan.

The full interview with Anne Sheehan will be published in the February edition of the Citywire Global magazine.