Hedge Fund Billions Invested in Private Prisons Exposed

WASHINGTON—The American Federation of Teachers is urging public pension trustees with more than $3 trillion under management to review their holdings in the wake of a new report exposing hedge funds and corporations that are profiting off the jailing of immigrant families in private prisons.

The AFT periodically issues reports ranking asset managers, to both educate trustees of pension funds and shine a light on assets held by public pension systems. A new edition, released Friday, reveals that Renaissance Technologies, Wellington Management Group and 24 other funds hold over $4 billion in stock in General Dynamics, GEO Group and CoreCivic—three firms making money off the Trump administration’s policies at the southern border.

The hedge fund industry has invested billions in for-profit detention, and many public pension funds are exposed through these funds or via direct shareholdings.

The AFT Trustee Council, which helps educate and support trustees that oversee the retirement security of 1.7 million AFT members and their families, will now review the report, which recommends a thorough examination of the fiduciary and legal risks of investing in businesses that trade in bigotry and hate.

The report advises pension trustees to examine portfolios for exposure to the named asset managers and to consult the watch list when making asset allocation decisions. They are strongly encouraged to ask hedge funds to divest their private prison holdings and commit publicly to avoid them in the future.

AFT President Randi Weingarten said, “Hedge funds that invest in private prisons are not only profiting off a broken justice system and abetting the administration’s policies of family separation and the permanent harm it has caused children. They are also making a risky bet on an industry rightfully under siege. Trustees have a fiduciary duty to ensure workers’ capital is invested in a fiscally prudent manner. The AFT will continue to work closely with the AFT Trustee Council to safeguard workers’ retirement security from those who would prefer to undermine it by exposing our members and retirees to unacceptable risk.”

Jay C. Rehak, president of the Chicago Teachers’ Pension Fund Board of Trustees and chair of the AFT Trustee Council, said: “We should not be in the business of putting our pension dollars at risk by investing in the types of industries that hurt our children and society as a whole. The Chicago Teachers’ Pension Fund is taking a very hard look at its investments, and we encourage other public pension funds to do the same.”

California Federation of Teachers President Joshua Pechthalt said, “California educators do not want to fund family separation through their retirement savings. We have called on CalSTRS [California State Teachers’ Retirement System] and CalPERS [California Public Employees’ Retirement System] to stop profiting from family separation, and CalSTRS has begun to evaluate its exposure to these private prisons. We plan to use this report to take further aim at the hedge funds profiting from family separation and look closely at where our pension funds may invest in them.”

The political and legal tide is turning against private prisons and the administration’s failed “zero tolerance” policies. Illinois, Iowa and New York have already passed legislation banning private prisons, and a federal judge has ordered the administration to reunite separated families. The vast majority of the American public opposes the president’s immigration policies as midterm elections loom.

It is precisely this vulnerability that makes private prison investments not only immoral but also a bad financial bet. Both New York City and the New York State Common Retirement Fund recently dumped private prisons across all asset classes. And in California, CalSTRS is evaluating the investment risks, and the CalPERS investment committee will meet this month and will hear from teachers urging divestment.

The AFT has a long history of demanding transparency from the investment community. After the AFT contacted investment managers with exposure to gun companies in April, four funds—Fidelity, Vanguard, Dimensional Fund Advisors and Voya—engaged directly with manufacturers regarding their concerns. And hedge fund managers who manage defined benefit retirement funds have stepped away from their hypocritical involvement in political think tanks working to undermine them.

A second private prison watch list, to be released next month in part 2 of this report, will target investment managers who profit from the policies of mass incarceration targeting communities of color.

The full report is available here.