Under attack from a large national teachers union, Missouri political power broker Rex Sinquefield quit the board of Dimensional Fund Advisors, the investment company he co-founded and that made him a multimillionaire.
The American Federation of Teachers last month put the company on a black list of advisers with ties to people who it says favor cutting teacher pensions. Dimensional, known as DFA, manages money for 19 public pension funds and six union funds, among other businesses.
A DFA spokeswoman said Sinquefield made his own decision to quit the board of directors at the firm, which is based in Austin, Texas.
“He decided to step down in order to ensure that his personal opinions were not confused with Dimensional policy. It was his decision to avoid any kind of misunderstanding,” the spokeswoman said in an e-mail. He resigned on April 24.
That was six days after the Federation of Teachers listed 32 investment companies tied to executives “advocating for the elimination of traditional defined benefit plans.”
The union cited Dimensional’s ties to Sinquefield, who founded and funded the Show-Me Institute, a conservative think tank in St. Louis.
“The Show-Me Institute has explicitly called for Missouri to shift to a defined contribution plan for state employees,” said the Federation’s report. “The Show-Me Institute is part of a larger network of conservative state-based organizations — the State Policy Network — that routinely advocates for pension privatization.”
The teachers union backs “defined benefit” pension plans — the kind that guarantee a monthly check for life, but leave governments on the hook for paying the bill if the fund runs out of money. “Defined contribution” plans, such as company 401(k) plans, allow employers to limit their contribution and don’t promise that the funds will last for an employee’s lifetime.
David Booth, chairman of DFA, told Pension & Investments magazine that Sinquefield’s politics were a problem for DFA.
“His political aspirations and workings got us into the penalty box. That is not something he wanted to do,” Booth said in an online article on Monday. Pension plans are “how we make our living. We are big fans of defined benefit plans.”
The Show-Me Institute referred questions to Sinquefield. His spokeswoman Laura Slay said he was unavailable. She released a statement noting contributions to local charities from Sinquefield and his wife.
“Their philanthropy and public policy has always followed their dedication to improving their home state and the lives of those who live here,” the statement said.
Teachers, and sometimes union officials, have powerful influence over the selection of investment advisers for teacher pension plans across the country. Teachers often elect the board members.
In St. Louis city, seven of 11 members of the Teachers Retirement Fund are elected by teachers and others covered by the plan. One of the elected members is also an American Federation of Teachers official. The federation represents city teachers.
Part of the St. Louis teachers pension fund is invested through DFA, said Byron Clemens, a former pension fund board member and co-chairman of the city teachers unions’ political education committee. The board reduced the amount managed by the firm, he said, but that was because of investment performance.
“We would not have singled out DFA because of Rex’s activities,” he said.
The current management of the pension fund did not respond to a request for comment.
Leaders of public pension funds are sensitive about calls to cut back pensions. William Atwood, director of the Illinois State Board of Investment, last month demanded to know if the leader of the Third Point Capital hedge fund supported cutting pensions. The Illinois pension fund has invested $31 million with Third Point.
An article in Rolling Stone magazine said Third Point’s leader, Dan Loeb, supported StudentsFirst, a school reform group which criticizes teacher pensions. The teachers federation also targeted money managers who support StudentsFirst.
Atwood said it would be “troubling and embarrassing” to learn that the firm investing its pension money wanted to reduce pensions.
Falling tax revenue after the Great Recession has turned attention to the cost of public worker pensions across the country.
The Show-Me Institute commissioned a recent study arguing that Missouri pensions are in much worse shape than official figures show. The study said the five biggest state pension plans were underfunded by $54 billion, not the $11.4 billion officially reported.
Sinquefield retired from Dimensional as co-chairman in 2005 but remained on its board. He moved to his native Missouri and quickly became a major funder of politicians and causes, most of them conservative. He is an opponent of the state income tax, and backed the referendum that returned control of the St. Louis police to city government.
Besides managing pension fund money, Dimensional serves corporate clients and runs a family of mutual funds.
Editors note: This story was changed Friday to correct the name of StudentsFirst.
