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Investment Stewardship FAQs

How does PERA define investment stewardship? 

PERA’s investment stewardship philosophy is about serving as responsible stewards of plan assets for the ultimate benefit of PERA members, retirees, and their beneficiaries. Our stewardship goes beyond proxy voting and engagement to encompass other ways we serve as good stewards of the PERA portfolio. We do this by watching our investment costs, integrating financially relevant factors in our investment decisions, advocating for stronger markets, and evaluating our portfolios on an ongoing basis. In short, it’s how we stay true to our objective by pursuing the best risk-adjusted investment returns, while remaining authentic to our mission to provide retirement security for our members and ensuring the sustainability of the fund.
 

What is “fiduciary duty” and what does it have to do with PERA’s investment stewardship? 

PERA’s fiduciary duty is a legal obligation to act solely in the best interests of plan participants and benefit recipients. When it comes to PERA’s investments, PERA must exercise prudence in making investment decisions with care, skill, and diligence, and make those decisions in the best financial interest of plan participants. It is a huge responsibility and one we take seriously. PERA’s investment decisions are firmly rooted in the fiduciary duty we owe our members. That means all of our investment stewardship initiatives prioritize our members’ retirement security by focusing on positive long-term financial outcomes.

What is the purpose of the Investment Stewardship Report and who is it for? 

If you’re reading this, PERA’s Investment Stewardship Report may be for you! It’s our primary tool for communicating the ways we serve as good stewards of plan assets including:

  • What PERA’s philosophy and approach is to financially sustainable investing
  • How PERA protects members’ interests through the four key practices of our investment stewardship (Protect, Integrate, Advocate, and Evaluate)
  • Why stewardship matters to investors and PERA’s unique perspective on industry themes

Read the full report here.

Investment Stewardship Report
Why is the Investment Stewardship Report so long? What if I want to know more, but I don’t want to read the full report? 

The full Investment Stewardship Report is meant to be a comprehensive tool for PERA’s stakeholders who are interested in all aspects of our investment stewardship. However, we know different stakeholders have different interests and that is why we also offer the condensed Investement Stewardship Executive Summary that captures the main points of the full report. You also have the opportunity to view our series of short videos pertaining to PERA’s investment stewardship principles and activities. To explore these resources and your own interests in PERA’s investment stewardship, please visit our Investment Stewardship page.

Investment Stewardship Executive Summary
Why is keeping costs low part of PERA’s investment stewardship? 

PERA’s singular investment objective is to pursue the best returns relative to risk to the Total Portfolio over a very long time horizon. By negotiating for reduced fees, advocating for greater cost transparency, and pursuing effective portfolio management in-house, we are able to maximize the returns we earn through our investments. That contributes to better funding of the pension plan for all members, and larger nest eggs for our members who participate in the 401(k), 457, and Defined Contribution retirement savings plans, collectively known as Capital Accumulation Plans (CAPs). For more information on how we practice cost-conscious investing, please see the “Protect” section of this year’s Investment Stewardship Report.

Investment Stewardship Report
How does PERA integrate financially-relevant ESG factors in its investment decisions? 

The majority of PERA portfolios are constructed through fundamental financial analysis, which means PERA’s investment experts diligently evaluate factors that can present risks and opportunities for long-term financial success when determining which investments to make. Where environmental, social, and governance (ESG) factors are expected to impact the long-term financial performance of these investments, they are included in the overall mosaic of information considered when making an investment decision. That extends to PERA’s proxy voting decisions, which also incorporate factors that are expected to influence the financial performance of the public companies in which we own stock. (See below for details on proxy voting.) Whether we are actively selecting publicly-traded stocks and bonds, real estate, or private market funds for inclusion in the portfolio, PERA’s due diligence includes assessing financially material ESG factors specific to each active investment decision. For more information on how PERA integrates financially relevant factors in our investment decisions, please see the “Integrate” section of this year’s Investment Stewardship Report.

What is proxy voting? 

Proxy voting is a tool to align corporate management’s interests with the interests of shareholders. When an investor buys shares of stock in a public company, they are buying a piece of ownership in that company. And with that ownership comes the right and responsibility to vote on matters that can impact the company and its performance. Those matters can be put to ballot by the company’s board or its shareholders, and cover important company decisions like who will serve on the board of directors, whether or not a company merges with another company, and what kind of disclosures the company will make to shareholders. Shareholders can vote in person at a corporation’s annual general meeting (AGM), or cast their votes via an agent that votes according to the instructions submitted by the shareholder on their proxy ballot in advance of the AGM. This is called voting by proxy, or proxy voting.

PERA votes by proxy for shares held in public equity portfolios within the Defined Benefit (DB) and Capital Accumulation Plans (CAPs). For more information on the PERA Board of Trustees proxy voting philosophy and policies, please see the Board’s Proxy Voting Policy.

Proxy Voting Policy

 

Why is proxy voting important to PERA? 

PERA believes that the right to vote on corporate matters as a large shareholder is, in itself, an asset of the plan to be managed under our fiduciary duty. Through proxy voting, we can encourage strong management oversight and profitable business practices, and advocate for disclosures that provide investors decision-useful information on how the company is managing ESG risks and opportunities that are financially material. It’s one of our primary tools to engage portfolio companies and integrate relevant factors into our decisions. To learn more about how PERA integrates relevant factors in our proxy voting and investment decisions, review the Investment Stewardship Report.

What kind of advocacy does PERA participate in? 

The primary goal of our advocacy and engagement is to promote best practices in capital markets, the investment industry, and at the companies in which we invest. We do this by contributing our expertise to a variety of industry organizations, regulatory and legislative reform, and through proxy voting and advisory board participation for companies in which we have an ownership stake. Over the past few years, PERA has publicly advocated for:

  • Decision-useful disclosures of financially relevant ESG issues that can impact investors’ opportunities and risks
  • Unbundling research and transaction costs in public equity markets so investors have improved fee transparency
  • Proxy issues such as objective proxy advisory services and universal proxy cards so investors are empowered to maximize their ownership power
  • Fortification of public company auditing oversight for stronger financial integrity

 

Why does PERA evaluate its holdings on an ongoing basis? 

PERA conducts routine evaluations of its holdings and their contributions to the Total Fund’s risk and return performance through time. Additionally, we conduct periodic assessments of various ESG exposures underlying PERA portfolios. While ESG factor exposures do not drive our investment decisions, understanding these exposures can give us a different lens through which to view related risks and opportunities to which the portfolio may be exposed. Such evaluations help us to understand whether we are invested in companies that lead their peers in corporate governance, or whether our portfolios have lower carbon intensity than their benchmarks. For more information on how PERA uses independent data to evaluate these exposures, please see the “Evaluate” section of this year’s Investment Stewardship Report.

Investment Stewardship Report
Why does PERA prioritize financial sustainability over environmental or social sustainability in its investments? 

PERA invests fund assets in order to generate retirement income for our members in perpetuity. In order to meet those pension obligations, our investment objective is to pursue the best risk-adjusted returns to the Total Portfolio over a long time horizon. We will consider environmental, social, and governance factors when they are financially relevant to an active investment decision. At any given time, PERA may have investments in various companies, industries, or geographic regions that may come under scrutiny for personal, social, or political reasons. However, we must prioritize financial sustainability, over other types of sustainability, in our investment decisions.

What is divestment and why is PERA opposed to it? 

Divestment is the sale and abstinence from certain companies, industries, or geographic regions in an investment portfolio. Decisions to divest may be driven by personal or political values. The PERA Board explains its rationale for opposing divestment in its 2019 Statement on Divestment. For more information, please visit our Divestment page.

Statement on Divestment
As a PERA member, do I have an option to invest my own retirement savings in environmentally or socially sustainable funds? 

Yes, as a PERA member, you have options to invest your own retirement savings in the CAPs in environmentally or socially sustainable investments. These options include:

  • PERAdvantage SRI Fund. This fund is managed by investment professionals who select stocks and bonds for inclusion in the fund based on certain criteria that are designed to promote financial returns as well as invest in companies that have positive environmental or social sustainability qualities.
  • Self-Directed Brokerage Account. This option allows participating members to invest their personal retirement contributions into publicly traded securities (e.g., stocks, bonds, and exchange traded funds) and mutual funds of their choosing through an individual brokerage account. Each participant assumes responsibility for selection of investments, and may include those which align with their own personal, social, or environmental values.