Some School Groups React to Newtown Tragedy: By Scouring Pension Plans

Gun Money

While the shock, disbelief, sadness and sympathy were universal, individuals and institutions had different responses to the Newtown tragedy; one that was not immediately predicted was the reaction of some public pension plans.

The California State Teachers’ Retirement System (CalSTRS), the largest U.S. teachers’ retirement fund, first announced it was reviewing its pension investment with Cerberus in the wake of the tragic shooting at Sandy Hook Elementary School in Newtown. The private equity fund owns Freedom Group Inc, which owns Bushmaster Firearms International that made the rifle that was used in the shootings. CalSTRS had invested $751.4 million with Cerberus by the end of March 2012, out of a portfolio valued at $154.3 billion

Sinful Stock

Stock from companies that are associated with (or are directly involved in) activities that are widely considered to be unethical or immoral. Also known as “sin stock.”


“This latest incident, which occurred at a school and involved fellow educators and the children we cherish, is a tipping point for CalSTRS and speaks to the correctness of our actions. This is not only the right thing to do but positions us to deal with the financial pressures we anticipate this sector of the industry will face,” said investment committee chair Harry Keiley in announcing that the Retirement System would be divesting its positions in assault weapons manufacturers.

Others Rethink Gun Investments

Cerberus, meanwhile, said it would hire a financial adviser to sell its interests in Freedom Group and return the proceeds to investors.

A recent survey of several of the largest state teachers’ retirement systems found that they may have tens of millions of dollars invested in publicly traded gun manufacturers.  CalSTRS will not be the only pension fund to avoid financial investments in this sector.

Fiduciary Duty

Fiduciaries of pension and retirement plans owe a fiduciary duty to their plan participants and beneficiaries. Current events may be similar to positions that some pension plans took in the past when it came to investments in tobacco (a “sin” stock) and in companies doing business in South Africa during apartheid. Balancing one’s fiduciary duties, especially in light of a tragedy, can prove to be difficult.

About Ann Longmore

Ann is Executive Vice President of Willis' Executive Risks practice. Based in New York, she has been with the compa…
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