County Investments : Panel Votes to Steer Away From S. Africa
The Los Angeles County Board of Investments, declaring that South Africa is an “unstable nation both politically and economically,” voted unanimously Wednesday to steer future stock purchases using the county’s $5-billion pension fund away from companies doing business in that strife-torn country.
The decision does not require a ban on investing in all South Africa-connected enterprises, but it does require the board to invest elsewhere if the alternative is just as financially sound. The panel ordered the fund’s 12 securities managers to immediately implement a policy requiring the purchase of non-South African-linked securities under the new criteria.
Only if no other investment opportunity of comparable promise is available are the managers at liberty to invest county money in South Africa or in companies doing business there.
The nine-member board stopped short of ordering divestiture of $660 million in pension funds tied up in American firms with South African operations. But panel members said if its investment managers find opportunities to prudently divest, they will be expected to sell.
101,000-Member Fund
The board, composed of both elected and appointed members, is responsible for the management of the pension fund of 71,000 active and about 30,000 retired county employees.
Wednesday’s action followed more than six months of study by individual members over the extent to which they could rid the pension fund--the state’s third largest--of holdings linked to the white minority-controlled government. The action also comes about six weeks after the Board of Supervisors voted to oppose divestiture.
The board appoints four of the nine members of the autonomous investment panel.
The investment panel described the policy as “interim in nature and subject to modification or cancellation . . . pending alteration of the civil volatility and unrest in the Union of South Africa.”
‘A Significant Step’
Supervisor Kenneth Hahn, who failed on Aug. 27 to win backing for a total divestiture recommendation to the investment board, expressed satisfaction at Wednesday’s development. Hahn called the vote “a significant step in the right direction that I hope will lead to full divestiture in the future if the Union of South Africa does not act to grant full rights and liberties to all of its citizens.”
County Treasurer-Tax Collector Richard Dixon, by law a voting board member, said the unanimous vote “does not represent a divestiture policy in any manner, shape or form.” But he said it does empower investment managers to sell off existing holdings if political or economic changes occur in South Africa that pose a danger to the funds.
Investment managers will be required to report regularly to the panel on the status of South African-related securities, Dixon said.
The vote reflected legal opinions that had advised board members that they could be held personally liable in the event of divestiture resulting in financial losses to the pension fund.
Bondie Gambrell, the investment board member who proposed the policy, said, “I think it goes farther than any divestment or any plan existing today.” He said divestiture policies adopted by many governmental agencies have called for lengthy procedures and legal steps before securities can be sold.
“We think it would be prudent to start pulling money out immediately,” Gambrell said.
The City of Los Angeles retirement board ordered on Aug. 27 a five-year phase-out of its $250 million in South African investments. A month earlier the Los Angeles Board of Police and Fire Commissioners voted a similar phased purging from its $1.8-billion pension fund of securities linked to South Africa.
The Department of Water and Power’s retirement board has yet to take action on divesting about $140 million of its $1-billion employee pension fund that is tied up in stocks and bonds in firms with South African operations.
