Tuesday, April 15, 2008

Pension Funds Gain Leeway On Terror Laws

Several state legislatures are reconsidering or rejecting bills that would force state pension funds to divest themselves of companies doing business with states deemed sponsors of terror, according to this article from Wall Street Journal Online.

A year ago, legislators rushed to sponsor bills compelling their state pension funds to sell off companies doing business with Sudan, Iran or other states deemed sponsors of terror. Governors could hardly wait to sign the measures into law.

But recently, with markets pummeling most pension funds, this hard-line stance is coming under greater scrutiny. Lawmakers are opting for less-stringent bills, offering fund managers more flexibility or simply rejecting new divestment measures.

"These bills limit a pension fund's scope for investing and adds to their administrative costs," says Mark Ruloff, a Watson Wyatt consultant. "That isn't necessarily what beneficiaries want to hear at a time when markets are down and their fund's liabilities are poised to rise."

The recent turnabout suggests a possible change in the continuing debate over what, if any, taxpayer-supported funds should play in world affairs. Many lawmakers have argued that public money shouldn't be used in a way that could threaten national security. Funds counter that legislative efforts, while well-meaning, conflict with a fund's fiduciary duty to get the best returns for beneficiaries.

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