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LABOR POOLS
Labor
earns dividends for members and the community with purposeful investing.
By Kevin Kipp
Sometimes
ends and means have a happy confluence. Take for instance the
pension fund for the Carpenters' District Council. As part of
their portfolio discipline, the trustees of that fund try to put
their active members to work.
No
surprise. What might astonish is that the Carpenters' board's
investments are approaching one billion -- you're reading this
right -- one BILLION dollars.
Who'd
have guessed it? According to Terry Nelson, secretary-treasurer
of the Carpenters' District Council, not many. "Most people don't
understand," he says. "I hate to say it, but even most unions
don't understand their own power. Some unions turn their money
over to money managers, and don't care how it's invested, as long
as they get the return."
Nationally,
according to Standard & Poor's 2000 Money Market Directory,
labor unions have some $391 billion under Taft-Hartley management:
mostly pension funds, some health & welfare funds. (Union
pension funds administered under the 1947 Taft-Hartley legislation
are jointly administered by labor and management representatives.)
"I'm
a little more sensitive to the fact that when I invest in a company
I want it to produce something that results
in man-hours for my people if at all possible," Nelson says.
His
organization comprises 23 locals and 13,000 members in 42 counties.
The
council is also responsible for 4,200 former members' union pension.
Roughly two-thirds of it comes from current working members' contributions,
another one-third from pension fund investments.
In
addition to having equal numbers of management and labor on his
board of trustees, the Carpenters' also have financial consultants.
Their allocation tables, Nelson says, call for "up to 65 percent
in equities, up to 40 percent in fixed income, and up to 10 in
real estate."
Any
"up-to" for cash?
"I
don't even know what cash is," he shoots back. "If you don't have
your money working for you you're not doing something
right. Before any investment professionals work for us, we make
sure they're not sitting on a large cash position."
Council
pension money can earn interest income in investment grade bonds.
"We don't do junk; triple-A rated or better," he says. "By the
way, that excludes foreign bonds."
Buy
American.
Nelson:
"That's right."
Asked
if most publicly held companies weren't more likely to put machinists,
rather than his carpenters, to work, Nelson says, "What about
a building that's going to house a new automobile plant, maybe
one to manufacture motors. Machinists might be hired after the
plant is up, but my people get to build it."
Bob
Kelley, president of the Greater St. Louis Labor Council, says
like any portfolio, Taft-Hartley pensions are "diversified, so
a slump in any portion of the market doesn't devastate the fund."
Their
trustees, he adds, want the money "in safe investments from a
fiduciary point of view...a good rate and safe. Remember, we're
investing people's pensions."
More
Kelley: "There's another side...making investments that also have
a benefit for the community. What happens if you build a thousand
houses? You'll need four or five
grocery stores. The grocer buys a car, the car dealer buys clothes,
the salesperson buys groceries, and so it begins again."
Kelley
says the Carpenters' trustees' style is "pretty entrepreneurial.
They're pro-actively involved in investment policy."
He
hopes to encourage other labor organizations to match the Carpenters'
trustees' involvement by selecting financial advisors who understand
and appreciate the potential benefits of investing with purpose:
"They [advisors] exert a lot of influence on people and a portfolio."
Besides
public companies and investment grade bonds, outfits like Nelson's
can select investment trusts. What's more they can help those
trusts identify opportunities close to home.
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"When
I invest in a company, I want it to produce something
that results in man-hours for my people if at all possible."
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Terry Nelson,
Secretary-Treasurer
of the Carpenters' District Council
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"Look
at what Bob Sauer is building in Clayton, the Shaw Park Plaza,"
Nelson says. "It's a 25- or 30-story building, plus a parking
garage. The vision is Bob's and he needed financing: Multi-Employers
Property Trust made the financing work. My
union's got $35 million invested in Multi-Employers. Did my investment
make work for my union members? Our involvement made that happen."
Nelson
says locally, only International Brotherhood of Electrical Workers
Local #1 are joiners with the Carpenters' in the Multi-Employers
Property Trust.
IBEW has diversified investment options, as well, and not
just its $400 million in pension funds. According to the Local
#1's business manager, Bob Miller, if you add health and welfare,
vacation, holiday, income security, and 401k funds, the local's
portfolio "is probably around a half billion."
His
3,000 pensioners receive income from both that local pension,
a defined contribution annuity, and an International pension,
a defined benefit plan to which all active members contribute
3 percent of their earnings.
Miller
says his local's pension plan investment in the Washington, D.C.-
based AFL-CIO
Housing Investment Trust (HIT) has financed a number of projects
in St. Louis including the renovation of the Chase Park Plaza,
One McKnight Place, a 221-unit assisted-living facility in University
City and McCormack House, a 96-unit apartment development.
A sister
program to the AFL-CIO BIT is the Building Investment Trust. The
combined programs have more than $3 billion under management according
to Gregory Dyson, director of marketing, for the funds. With 470
participants, 80 percent of the funds are Taft-Hartley pensions;
the balance is public employee pension money.
"That
Taft-Hartley component," Dyson says, "is a broad cross section:
building trades and service unions from 70 unions affiliated with
the AFL-CIO."
Both
funds are 100 percent invested in real estate.
HIT
invests in government and government agency mortgage backed securities,
for minimal credit risk. BIT's commercial real estate investments
total more than $1 billion. In the St. Louis area the BIT has
invested $33 million in three projects; the IRS Regional Service
Center, The FBI Regional Headquarters and the Richardson Corporate
Center in Arnold.
According
to Dyson, 17 St. Louis pension plans hold assets totaling some
$82 million in HIT and BIT, the Carpenters' being the largest
investor. "We invest approximately $1 billion a year in housing
and commercial real estate says Dyson, providing investors high
security and competitive returns while helping generate local
jobs and foster economic development.
Back
to IBEW's Miller. "We also have our own S&P 500 index funds,"
he says, "the NECA-IBEW 500 Index Fund. It was seeded with national
pension money, and each IBEW local pension has the option of investing
in that."
NECA
is the National Electrical Contractors Association, pronounced
NEE'-ka. The fund is $4 billion, Miller says.
"Through
it, we have the ability to influence proxy and construction decisions,"
he says, "consistent with our fiduciary responsibility."
Kevin Kipp runs Bubble Communications, a creative services and community
relations firm in St. Charles.
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