Teachers Union and Hedge Funds War Over Pension Billions
Labor leader aims to pull money from managers who promote retirement cutbacks; a billboard over Times Square
Randi Weingarten, president of the American Federation of Teachers, sees some proposals by hedge-fund managers to overhaul public schools as an attack on teachers.PHOTO: JESSE NEMEROFSKY/ZUMA PRESS
Daniel Loeb, Paul Singer and dozens of other hedge-fund managers have poured millions of dollars into promoting charter schools in New York City and into groups that want to revamp pension plans for government workers, including teachers.
The leader of the American Federation of Teachers, Randi Weingarten, sees some of the proposals, in particular the pension issue, as an attack on teachers. She also has influence over more than $1 trillion in public-teacher pension plans, many of which traditionally invest in hedge funds.
It is a recipe for a battle for the ages.
Ms. Weingarten started by targeting hedge-fund managers she deemed a threat to teachers and urged unions to yank money from their funds. Then she moved to Wall Street as a whole.
Her union federation is funding a lobbying campaign to eliminate the “carried-interest” tax rate on investment income earned by many money managers. It is trying to defeat legislation that would increase the charitable deduction in New York state for donations to private schools. And it has filed a class-action lawsuit accusing 25 Wall Street firms of violating antitrust law and manipulating Treasury bond prices.
‘Given your strong support...for an organization which is leading the attack on defined benefit (DB) pension funds around the country, I was surprised to learn of your interest in working with public pension plan investors.’
—Randi Weingarten, in March 15, 2013, letter to hedge-fund manager Daniel Loeb
Some pension funds have withdrawn money from hedge-fund managers criticized by the teachers union. And some hedge-fund managers stopped making donations to advocacy groups targeted by Ms. Weingarten.
Hedge funds, reluctant to buckle to the pressure, say Ms. Weingarten is doing a disservice to the teachers she represents, because funds should aim solely to earn the highest possible return on their assets. The personal beliefs or donations of hedge-fund managers, they argue, shouldn’t be a factor in that decision. At least one manager, Mr. Loeb of Third Point LLC, has increased his donations to a charter-school group, citing Ms. Weingarten.