State CPS pension bailout also a boon for its investment managers
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.
53 investment firms collect fees from the Chicago Teachers Pension Fund?
Who are they?
|Adams Street Partners||Chicago|
|Adelante Capital Management||Oakland|
|Attucks Asset Management||Chicago|
|Callan Associates||San Francisco|
|CB Richard Ellis||Los Angeles|
|Channing Capital Management||Chicago|
|Credo Capital Management||Baltimore|
|Dimensional Fund Advisors||Austin, TX|
|DV Urban Realty Partners||Chicago|
|Fremont Realty||San Francisco|
|Garcia Hamilton & Associates, L.P.||Houston|
|Harris Investment Management||Chicago|
|Holland Capital Management||Chicago|
|ICV Capital Partners||New York|
|JP Morgan||New York|
|K2 Advisors||Stamford, CT|
|Lazard Asset Management||New York|
|Leading Edge Advisors||San Francisco|
|LM Capital||San Diego|
|Lombardia Capital Management||Chicago|
|Merrill Lynch||New York|
|Morgan Stanley||New York|
|Muller & Monroe||Chicago|
|Northern Trust Company||Chicago|
|Olympus Real Estate Partners||Dallas|
|Palladium Partners||New York|
|Piedmont Capital Management||Greensboro|
|Prudential Real Estate Investment||New York|
|Progress Investment Management||San Francisco|
|Pugh Capital Management, Inc.||Seattle|
|Taplin Canida & Habacht||Miami|
|URDANG||Plymouth Meeting, PA|
|Waddell & Reed Asset Management||Overland Park, KS|
|Western Asset Management||Pasadena, CA|
|William Blair & Co.||Chicago|
|Zevenbergen Capital Management||Seattle|
Chicago Teachers Pension Fund-- Income vs. Investment Expenses
How much does the Chicago Teachers Pension Fund pay to investment managers?
|Year||Investment Income||Investment Expenses|
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.
|Year||Pension Debt||YoY Change||Cumulative Change|
Source: Chicago Teachers Pension Fund; Illinois Department of Insurance
Organizations in this Story
Attucks Asset Management • Channing Capital Management • Chicago Public Schools • Dimensional Fund Advisors • Holland Capital Management • Illinois Department of Insurance • Mesirow Financial • William Blair & Company