Chicago City Wire

Chicago City Wire

Friday, December 13, 2019

State CPS pension bailout also a boon for its investment managers

Politics

By LocalLabs News Service | Jul 23, 2017

Neilbluhm
Billionaire and prominent Democrat donor Neil Bluhm's Walton Street Capital is one of 53 investment firms that work with the Chicago Teachers Pension Fund. | Rush Street Gaming LLC

If state taxpayers bail out the beleaguered, $10.1 billion in debt Chicago Public Schools' pension fund, they won't merely be covering cash shortfalls for teacher retirements.

They'll also be sending hundreds of millions to investment firms and hedge funds paid to manage the fund.

A Chicago City Wire analysis found the Chicago Teachers Pension Fund (CTPF) paid $516 million in "investment fees" over the past 14 years — the equivalent of 5.4 percent of the investment returns the funds earned.

It adds up to about $37 million per year, or approximately two of every ten dollars in state taxpayers would give to CPS for pensions this year.

That's if the bailout bill becomes law. Gov. Bruce Rauner is waiting for State Sen. John Cullerton (D-Chicago) to send it to his desk, where he has promised a veto. Chicago Democrats would then try to override Rauner.

Wall Street, La Salle Street, Clout Street

The specific allocation of these funds is kept secret, though CTPF lists the 53 firms who stand to get these fees on its web site.

They include Wall Street giants like J.P. Morgan and Morgan Stanley and La Salle Street institutions Northern Trust and William Blair.

Politically-connected Chicago investment funds also work for CTPF — like John Rogers' Ariel Investments, Mesirow Financial, Walton Street Capital, the late Lou Holland's Holland Capital Management and Capri Capital, led by Lake Forest's Quintin E. Primo, III.

Holland, Primo and Rogers were all major fundraisers for President Barack Obama, who pressured state pension funds to steer business their way while a state senator. 

Primo is also business partners with politically-connected Chicago real estate developer Thomas Rosenberg, once a top Democratic fundraiser.

Billionaire Neil Bluhm, a major donor to Obama as well as former Illinois Governor Rod Blagojevich, Attorney General Lisa Madigan, U.S. Sen. Dick Durbin (D-IL) and Chicago Mayor Rahm Emanuel — runs Walton Street Capital. He also owns Rivers Casino in Des Plaines. 

DV Urban, founded by Robert Vanecko, nephew of former Chicago Mayor Richard Daley and Allison S. Davis, Obama's former boss and a South Side political powerbroker, is listed. As Channing Capital, led by Wendell E. Mackey of the South Loop. Mackey has contributed to the campaigns of State Sen. Donne Trotter (D-Chicago) and former City of Chicago Treasurer Stephanie Neely.

Attucks Asset Management helps CTPF manage its managers. It is run by Les Bond, who founded the firm in 2001. He has contributed to the campaigns of former Governor Rod Blagojevich, former Cook County Board President Todd Stroger, State Rep. Jay Hoffman (D-Collinsville), former State Representative and Chicago City Council Member turned lobbyist Will D. Burns, former State Rep. David Miller (D-Lynwood), former City of Chicago Treasurer Judy Rice, U.S. Rep. Robin Kelly (D-Matteson) and State Sen James Clayborne (D-East St. Louis.)

Adams Street Partners is one of ten private equity firms used by CTPF. Former Chicago Bear Gary Fencik is a partner at the firm, where he runs business development.

CTPF pays fees to two hedge funds:  K2 Advisors, owned by Franklin Templeton Investments, and Mesirow Financial's Mesirow Absolute Return Fund, based in the Cayman Islands.

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53 investment firms collect fees from the Chicago Teachers Pension Fund?

Who are they?

FirmHeadquarters
Adams Street PartnersChicago
Adelante Capital ManagementOakland
Ariel InvestmentsChicago

Attucks Asset ManagementChicago
Callan AssociatesSan Francisco
Capri CapitalChicago
CB Richard EllisLos Angeles
Channing Capital ManagementChicago
Credo Capital ManagementBaltimore
Dimensional Fund AdvisorsAustin, TX
DV Urban Realty PartnersChicago
EARNEST PartnersAtlanta
Europa CapitalLondon
Fremont RealtySan Francisco
Garcia Hamilton & Associates, L.P.Houston
HarbourvestBoston
Harris Investment ManagementChicago
Hispania PartnersChicago
Holland Capital ManagementChicago
ICV Capital PartnersNew York
IntercontinentalBoston
JP MorganNew York
K2 AdvisorsStamford, CT
Lazard Asset ManagementNew York
Leading Edge AdvisorsSan Francisco
LM CapitalSan Diego
Lombardia Capital ManagementChicago
MacquarieSydney
Merrill LynchNew York
Mesirow FinancialChicago
Morgan StanleyNew York
Muller & MonroeChicago
Northern Trust CompanyChicago
Olympus Real Estate PartnersDallas
Palladium PartnersNew York
Pantheon PartnersLondon
Pharos CapitalDallas
Piedmont Capital ManagementGreensboro
Prudential Real Estate InvestmentNew York
Progress Investment ManagementSan Francisco
Pugh Capital Management, Inc.Seattle
Rhumbline AdvisorsBoston
RREEF/Deutsche BankChicago
SyncomBethesda, MD
Taplin Canida & HabachtMiami
TownsendCleveland
UBS RealtyHartford
Urban AmericaDallas
URDANGPlymouth Meeting, PA
Waddell & Reed Asset ManagementOverland Park, KS
Walton StreetChicago
Western Asset ManagementPasadena, CA
William Blair & Co.Chicago
Zevenbergen Capital ManagementSeattle

Chicago Teachers Pension Fund-- Income vs. Investment Expenses

How much does the Chicago Teachers Pension Fund pay to investment managers?

YearInvestment IncomeInvestment Expenses
2003$339,736,037$26,233,867
2004$1,507,342,352$28,482,561
2005$1,068,924,722$32,026,382
2006$1,131,956,799$34,013,421
2007$1,947,810,351$38,370,475
2008-$696,012,877$41,525,892
2009-$2,428,959,357$34,947,387
2010$1,147,312,534$39,738,780
2011$2,165,485,938$42,193,297
2012$3,993,539$42,076,606
2013$1,216,901,580$42,318,756
2014$1,726,213,073$41,078,099
2015$419,749,926$38,009,628
2016$7,774,659$35,761,822
TOTALS$9,558,229,276$516,776,973

Chicago Teachers Pension Fund- The road to $10.1 billion in debt

CTPF has earned $9.6 billion in its investments over the past 14 years-- but its payouts and promises to teachers have outpaced those earnings by 84 percent. The fund's debt has grown from $2.1 billion to $10.1 billion over the period.

YearPension DebtYoY ChangeCumulative Change
2003$2,143,885,319

2004$1,784,125,086-$359,760,233-$359,760,233
2005$2,422,412,769$638,287,683$278,527,450
2006$2,607,108,968$184,696,199$463,223,649
2007$1,904,575,094-$702,533,874-$239,310,225
2008$3,720,263,421$1,815,688,327$1,576,378,102
2009$7,257,580,085$3,537,316,664$5,113,694,766
2010$7,337,415,601$79,835,516$5,193,530,282
2011$6,596,539,709-$740,875,892$4,452,654,390
2012$7,904,219,385$1,307,679,676$5,760,334,066
2013$9,334,547,550$1,430,328,165$7,190,662,231
2014$8,652,221,574-$682,325,976$6,508,336,255
2015$9,239,622,495$587,400,921$7,095,737,176
2016$10,132,842,988$893,220,493$7,988,957,669

Source: Chicago Teachers Pension Fund; Illinois Department of Insurance

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Organizations in this Story

Mesirow FinancialHolland Capital ManagementIllinois Department of InsuranceWilliam Blair & CompanyChicago Public SchoolsAttucks Asset ManagementChanning Capital ManagementDimensional Fund Advisors

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