Democrats Pressure PBGC to Adopt ‘Emerging Manager’ Model

By Andrew Remo • September 29, 2014 • 0 Comments
Lobbying groups representing minority investment fund managers, backed by key Democratic members of Congress, recently met with key administration officials to press the case for doing business with minority and women-owned firms.

According to The Hill, Sens. Elizabeth Warren (D-Mass.) and Cory Booker (D-N.J.) and nearly 75 federal, state, local and private sector pension and investment managers gathered at the White House with a trio of President Obama’s Cabinet secretaries — including Labor Secretary Thomas Perez, Treasury Secretary Jack Lew and Commerce Secretary Penny Pritzker, who sit on the board of the Pension Benefit Guaranty Corporation (PBGC) — as part of a congressional push for pension and investment managers to seek more business with minority and female-owned firms.

This high-level meeting comes after nine members of the U.S. Senate sent a letter to the PBGC Board of Directors in July complaining that “diverse and emerging” managers were severely underrepresented among the investment managers that the PBCG currently uses. The senators, who included Warren, Richard Durbin (D-Ill.), Chuck Schumer (D-N.Y.), Ben Cardin (D-Md.) and Richard Blumenthal (D-Conn.), called on the PBGC to adopt an “emerging manager” program.

Some states and localities use the “emerging manager” model to ensure that minorities manage at least a portion of pension fund assets set aside for the retirement benefits of state and local government employees.

While the term “emerging manager” initially was used to describe investment managers in new or smaller firms, a term that has more recently been applied to include minority or female-owned investment management firms. For example, in Illinois, the law defines an emerging investment manager as a “qualified investment advisor that manages an investment portfolio of at least $10,000,000 but less than $10,000,000,000 and is a minority owned business, a female owned business, or a business owned by a person with a disability.”

Some Democrats in Congress are now putting serious and sustained political pressure on the PBGC to change their fund acquisition practices to reflect these practices that already exist in several states and localities.

It remains to be seen how the PBGC and the Obama administration will respond.

Andrew Remo is ASPPA’s Congressional Affairs Manager.