Teachers Unions Vs Hedge Funds: The Battle Over Billions

Tyler Durden's picture

Randi Weingarten is the president of the American Federation of Teachers, and is a name that hedge fund managers and those on Wall Street are beginning to learn quite well.

About a decade ago, some liberals joined conservatives in pushing to expand charter schools. As the WSJ reports, those efforts received financial support from hedge fund managers including Dan Loeb, Paul Singer and Paul Tudor Jones, who together kicked in millions of dollars toward the effort. Some involved in the effort to push for the expansion of chartered schools portrayed public school teachers and their unions as obstacles to improving education, and thus the reputation of unions took a beating.

Enter Randi Weingarten. Weingarten was elected president of the American Federation of Teachers in 2008, and her aim was to restore public trust in public school teachers and their unions. Weingarten's federation represents about two dozen teachers unions whose retirement funds have a total of $630 billion in assets, a large portion of the more than $1 trillion controlled by all teachers unions according to the WSJ. Although the unions themselves control where the money is invested, Weingarten can make recommendations.

Weingarten instructed investment advisers at the federation's Washington headquarters to sift through financial reports and examine the personal charitable donations of hedge fund managers, focusing on those who want to end defined benefit pensions, and entities backing charter schools and the overhauling of public schools. In early 2013, the union federation published a list of roughly three dozen Wall Street asset managers it says donated to organizations that support causes opposed by the union, and the federation wanted union pension funds to use the list as a reference guide when deciding where to invest (or not invest) their money.

Said otherwise, if asset managers don't support unions, the unions won't invest with the funds.

The Manhattan Institute for Policy Research, a think tank that supports increasing school choice and replacing defined benefit pension plans with 401(k)-type plans is one of the groups that wound up on the list. Lawrence Mone, its president, said the tactics amount to intimidation, and that "I don't think that it's beneficial to the functioning of a democratic society."

To signify the importance of Weingarten's list, after KKR & Co. president Henry Kravis made the list in 2013, Weingarten received a call from Ken Mehlman, an executive at KKR. Mehlman said KKR had a record of supporting public pension plans, and Weingarten agreed - KKR was then taken off the list. Cliff Asness of AQR Capital Management went as far as hiring a friend of Weingarten and paying $25,000 to be a founding member of a group KKR was starting with Weingarten to promote retirement security. Asness was removed from the list.

Asness continued to serve on the board of The Manhattan Institute, however in September of last year an aide to Weingarten spoke to a California State Teachers' Retirement System (Calstrs) official about Asness's continued service - one phone call later and Asness said that he was stepping down from the Manhattan Institute board.

One hedge fund manager has been more combative however - Dan Loeb. The founder of Third Point is a donor to the Manhattan Institute and chairman of the Success Academy, which operates a network of charter schools in New York City.

A bit more combative is an understatement - Loeb pushed back on Weingarten, and didn't seem to care about the influence she had over where funds were directed.

As the WSJ explains

In a March 2013 letter to Mr. Loeb, Ms. Weingarten noted his support of a group “leading the attack on defined benefit pension funds” and said she was “surprised to learn of your interest in working with public pension plan investors.” Seeking business from union pension funds while donating to the group, she wrote, “seem to us perhaps inconsistent.”


The two agreed to meet.


Mr. Loeb emailed Ms. Weingarten, noting his fund’s average annual return of 21% over 18 years. “I completely respect the political considerations you may have and understand if other factors dictate how funds are allocated,” he wrote.


A week later, Ms. Weingarten wrote back to reiterate that unions were wary of investing with Mr. Loeb “given the political attack on defined benefit funds.”


In response, Mr. Loeb asserted that it must be “frustrating” for unions to invest with funds that “have different political views or party affiliations.” He added: “At least we can rejoice in knowing that as Americans we share fundamental values that elevate individual opportunity, accountability, freedom, fairness and prosperity.


The meeting was called off, and Mr. Loeb was added to the list.


At a fundraising dinner that May for his charter-school group, Mr. Loeb stood up and said: “Some of you in this room have come under attack for supporting charter-school education reform and freedom in general.” He called Ms. Weingarten the “leader of the attack” and pledged an additional $1 million in her name.


“Both Randi and I believe America’s children deserve a 21st century education, and I hope the day comes when she embraces the positive change created by public charter schools,” Mr. Loeb said recently in a written statement.

As part of the punishment, Loeb eventually lost $75 million from a Rhode Island pension fund. Around that same time, a giant billboard appeared above Times Square that was not kind to Weingarten - perhaps not a coincidence.

"We all guessed it had to be people like Dan Loeb" Weingarten said.

After the billboard, Weingarten and the union group launched an advocacy group called Hedge Clippers, that lobbied against proposed New York legislation to increase the charitable deduction for donations to public and private schools. The group also published a report called "All That Glitters Is Not Gold," that among other things, claimed that the high fees charged by hedge funds made them unattractive investments. Furthermore, the union group is funding a campaign to eliminate the carried interest tax rate on investment income earned by asset managers, as well as filing a class action lawsuit accusing 25 Wall Street firms of violating antitrust law and manipulating Treasury bond prices.

Other large pension funds such as an Illinois public pension fund and one of New York City's public pension funds have cut hedge fund investments. However, Loeb may have had the last laugh, as when Weingarten tried to convince a large Ohio fund to follow suit, it voted to remain invested in hedge funds, including Loeb's.

* * *

Regardless of a stance on this topic, this battle between Weingarten and the targeted hedge funds such as Third Point will remain an epic story to watch unfold. Also, as readers know, pension funds are severely underfunded, and given that NIRP and other insane central bank policies have created an environment where risk assets are a necessity if one wants to generate higher target returns, hedge funds may be one avenue that pension funds need to consider, whether the funds support charter schools or not.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
reader2010's picture

K-12 is managed from the top down by the interest of the big money. Ever heard of the Common Core? Who came up with that idea? Who had implemented it and for whose benefit?

juangrande's picture

You mean " no child left behind " a testing scam who benefited George W's brother, Neil? Or something else?

MalteseFalcon's picture

Wonder which side Hitlery is on?

Bet both sides think they have Hitlery.

philipat's picture

Those who can, do. Those who can't, teach...........

NoDebt's picture

Dan Loeb should hand them their money back and tell them to piss off.  Not like he's going to shit his pants over a few tens of millions in AUM.  For the annoyance factor you have to know when to cut a client loose.  A guy like Dan could backfill that AUM loss in about a week.

God knows I'm no fan of hedge funds but when your own clients are working AGAINST you, you cut them the fuck loose and wish them good luck (because they'll need it).


Larry Dallas's picture

This is great.

Teachers don’t want to be held accountable.

Teachers (who probably by the same token never taught economics or finance) feel they are still entitled to a pension with rates going negative in the western world.

So here’s a problem for the teacher to solve:

How do you intend to retire with your entitlements if these guys are the only one’s making a decent, somewhat sustainable yield?

mary mary's picture

Baloney.  You don't have to "study economics or finance" to invest successfully.  Indeed, those who "studied economics or finance" are running the Fed and the Wall Street Banks, and they are the ones bankrupting the country.

Bendromeda Strain's picture

Fail. You did not read for comprehension. He did not equate understanding of finance & economics with successful investing, he equated NIRP with defined benefit public pensions. If one understands finance and economics, they understand that those two are mutually exclusive because equities cannot expand at the prescribed rate without fraud.

mary mary's picture

Bendromeda Strain,

Consider these options:  All since 1996/05/13, since that's when VGSIX started.

1. Bonds:    VUSTX: Ann=8.0%, Mdd=18.4%

2. Bonds & Stocks:   1/2 VUSTX, 1/2 VFINX.  Ann=8.7%, Mdd=24.9%

3. Bonds, Stocks, Real Estate, Gold:  1/2 VUSTX, 1/6 VFINX, 1/6 VGSIX, 1/6 VGPMX, Ann=9.2%, Mdd=35.3%

Option 3 has highest Mdd, because Gold and Real Estate fell along with Stocks in 2008, and harder, but I believe a Gold bull market is inevitable.

If one can trade just a little, say holding a minimum of 100 trading days, I imagine one can do better.  Here are the results for a trading plan which holds exactly 2 of the 4 funds at any given time, and holds each fund at least 100 days:

4. Trading Plan: Ann=14.2%, Mdd=17.4%.  2 trades per year.

If you want to trade and can't trade at Vanguard at all, hopefully you could replicate the Vanguard funds using ETFs, stocks, etc.  Or use funds from other families like PIMCO, TRowePrice, Fidelity.  Etc.

P.S. So far, during 2016, I get.

1. Bonds: up 8.9%

2. Bonds & Stocks: up 24.4%

3. Bonds, Stocks, Real Estate, Gold: up 21.4%

4. Trading Plan: up 13.7%

S&P500: up 1.3%

In conclusion, I don't believe Pension Funds have to helplessly suffer from ZIRP.  When you have money (and Pension Funds have money), you're the boss, and you can always find someone who will sell you what you want, if you investigate and negotiate enough.  If your Pension Fund Manager isn't doing that, why are you paying him?

ACES FULL's picture

+1000  May I add that we all should be careful to limit{or stop completely if possible} spending our money with interests that are against what we believe in. Use their own tactics against the left/progressives. Good to Mr.Loeb,looks like there are skirmishes AMONG the elites after all.

balolalo's picture

I have never been more proud to be a California Teacher.   I love Zerohedge but I hate parasitic hedges.  

Fuck the parasites!   And fuck Trump!  

ACES FULL's picture

And you don't think that the union leaders who live high on the hog off your dues are parasites? I guess you are against charter schools and the ability of parents to choose what school their kids attend also since that is how this whole dispute described in the article started. Screw the kids as long as you get YOURS eh. We will see what you think of the parasites when your returns without them can't keep your bloated pensions afloat.

Bendromeda Strain's picture

That must have been an MDB sockpuppet driveby...

balolalo's picture

Ignorance on display.   You haven't the slightest idea of what you are talking about.  Societies are based on how they treat children, which includes educating them.  Where a society puts its money is what it values.   You are better going after the bloated prison-industrial complex.  Have you ever compared the cost per student with the the cost per inmate.  Which one is a better societal investment?   Have you seen the bloated military?  But yeah, let's cut teachers, that makes sense.  Who needs educated people running around?   Pennywise and Dollar foolish.    Most charters are race to the lowest bidder with the highest margins.  It is dumbasses like you who make more dumbasses for me to try to fix and educate in my classroom.  You are clueless.    

ACES FULL's picture

I thank God you aren't teaching my children. Its hard to believe you are a "teacher" since you apparently don't even understand my original comment and are jumping to all sorts of conclusions based on your selfish worldview. Show where I said ANYTHING about cutting money for EDUCATION please. You can't. Of course i'm a dumbass because I disagree with you right,CAN'T be the other way around can it? And YOU are a TEACHER. Give me a fucking break. No wonder Kalifornia is so fucked up. I usually try to have an honest debate with someone but you are clearly too far gone and I cringe at the thought that you are actually "educating" other peoples children.

downwiththebanks's picture

The parasites have a lot of downvotes!

jcaz's picture

Absolutely correct, NoDebt-  we've all had clients that we've had to "fire"-  you can't let the inmates run the asylum.  As a son of a Professor who taught for 40+ yrs in a medical school,  I know there are few who are less informed and more clueless about reality than teachers.

20 years ago, I had the opportunity to go back to my state University and fix their pension-  the idiots didn't realize that their 403b programs were being annuitized without their permission.   I was stunned to find myself explaining basic investment principles to business Professors whom I once paid to teach me.

I'm coming back as a welder in my next life.

fleur de lis's picture

...And those who can't teach, teach gym.

mary mary's picture

... And after they teach gym, get a Masters Degree in "Education" and become School Administrators, and then ride the gravy train for the rest of their careers.

downwiththebanks's picture

Or they get a job on Wall Street, staring at a screen all day and pushing buttons like an invalid.  

Good work if you get it and have no soul or concern for the planet.

mary mary's picture

Like Machiavelli, or Epictetus, or Buddha, or Jesus, or Sun Tzu?

Actually, many teachers have already had jobs in industry, and just want to do something they feel is more helpful.

What gain is there in ascribing the worst motives or talents to people you don't even know?

11b40's picture

If they can manage to eliminate the carried interest deduction for these so-called masters of the universe, I'm all for it. These arrogant pricks that buy politicians and have the laws written in their favor, trade on inside info, and front-run markets with HFT need more enforcement applied to their dealings.

mary mary's picture

Hitlery will keep the present system, since it is the most intrusive.

DownWithYogaPants's picture

Shrillary is on the side of the money for sure.  As she once said "There is no money here!"

D Nyle's picture

until schools can produce students ready for the real world by the age of 18, they are a failure (that includes charters)

downwiththebanks's picture

What does it mean to get ready for the real world?  Should they learn to push buttons like a typical Wall St. parasite?  Or should they learn to drive a car for Uber?

Calmyourself's picture

Yeah wow, great point... Tyler PLEASE bring the captcha back..  There are not two brain cells between the two of them..  PTR is that the gun or??

downwiththebanks's picture

What skills should someone learn in school?

I say teach them about capitalism and the slave trade.  Capitalism and the drug trade.  Capitalism and the theft of a hemisphere.  Capitalism and the genocide of the samesaid hemisphere.  Capitalism and debt.  Will that make them rich?

What say you?

css1971's picture

What skills should someone learn in school?

There are only 3.


  • Read and write. Everything else is based on this. It is your door to knowledge.
  • Mathematics. How to manipulate abstract symbols.
  • Philosophy. How to reason. Without the ability to think cogently, you are fucked. No matter how many facts you learn.


Everything else. EVERYTHING. Is supplementary. Maths and philosophy are highly interrelated. I would add some supplementary civics; How the world works, national and natural history, a bit of human nature. But the core of what you need to know to be a functioning member of society is very small. It certainly doesn't take anything like 13 years of education.

Think back to your schooling. How much of it do you remember? How much of it have you ever used? Well, all that time learning facts was wasted. Were you ever taught how to reason though?


P.s I would also regularise the language.  there are 1400 ways of spelling the just 42 sounds in English. learning spelling is also time wasted.

DownWithYogaPants's picture


YIKES!  Learning to reason from a "teacher" is like learning to fly from an earthworm

YIPPEE! I had great K - 12 teachers that were fully capable of reasoning


How do you guys get your makeshit polls to line up so well with the arrow buttons?

Archibald Buttle's picture

all that would be a good primer for somebody of low means to advance in life. all that is lacking is a primitive hemisphere to depopulate and exploit. we kinda already used that shit up.

downwiththebanks's picture

Bullshit: captalists are still dealing drugs (just ask the CIA) and stealing all sorts or resources.  You act like imperialism is dead, but hedge funds are imperialist blood suckers and this message board is filled with these worthless scum.

Capitalism teaches us that people exist to exploit, and there are always people parasitical and greedy enough to do so.  Capitalism has poisoned our heads to think only of money.

When you say "low means to advance in life," to remove the ambiguity of language, you mean "unwillingness to rape and murder people who aren't you so you can buy shoes with lights and a double latte."

zhandax's picture

If none of the students they graduated have the capability of producing above-average investment returns after 20 years (these unions didn't spring up yesterday), they don't deserve any retirement benefits.  They are, after all, working on a state-wide basis.

downwiththebanks's picture

So the sole measure of success is "producing above-average investement returns," you measure human begins by their ability to turn into some capitalist tyrrany's little piece of raw material.


If you don't help drug companies make people sick, you should die.

If you don't help the oil companies frack the world, die.

If you don't work as a poverty pimp for Goldman, you're worthless.

If you don't produce advertisements that sell us shit we don't need, you have no point to life.


What a rewarding and fulfilling life you must lead, raping and vandalzing the world for a few quid.

zhandax's picture

Yes, don't blame it on Common Core.  The loudest of these whiners were teaching before that abortion was adopted.

mary mary's picture

I was ready for the real world by age 18.  Of course, I didn't start off in the real world expecting $70,000 and a company car.

css1971's picture

It doesn't take 10 years of higher education to do that.

whatamaroon's picture

If I read correctly reader 2010 said common core.

mary mary's picture

Jeb Bush, when he was Governor of Florida.  He started all the "standardized testing, every year, twice a year".

Formula382's picture

Sure have. Pulled my 4 kids out of school to home school them due to CCSS.  It's funded by the Gates Foudation and many large organizations, embraced by Obozo and anything that smells of secular progressive left and implemented globally (yes read that again if you need to) by an organization by "Core Inc." out of India, they're publically traded.  

I've been all over the Tylers to do a deep dive on CCSS as it is truly the biggest wrecking ball our country has seen in decades.  

Badsamm's picture

"Let Them Eat Pink Slime"

Squid Viscous's picture

battle of the Jew bloodsuckers, FIGHT!

wisehiney's picture

You teachers would be much better off with Trump.

He is not promising to give our dwindling resources, (ie your potential pension bail out funds) to

illegals, student borrowers, fsa, etc etc.


"UNIONS FOR TRUMP! He will save our scraps!"

Mike2756's picture

They can manage their own money, then.

Wait What's picture

you'd think, being TEACHERS, they could TEACH 1 or a dozen of their members to professionally manage money. then again, if they were any good, they would have TAUGHT someone to do it already. Anyone dumb enough to believe defined benefit plans are not going the way of the dinosaur deserves the painful reality that is coming to them. as if it's not bad enough that people talk with their money, public sector unions are the WORST, because they talk with money that comes directly out of OUR pockets. fuck the lot of 'em.

downwiththebanks's picture

Maybe they were too busy teaching that a contract has meaning.

Archibald Buttle's picture

bravo, sir. this one deserves a <golf clap> that you get on golden tee with a chip in on a tough green, where a couple people get excited and shout, a little bit. nicely done.

mary mary's picture

OF COURSE there are teachers in every Public School System who could manage the retirement funds well.  But the Hedge Funds and other Wall Streeters contribute to the campaign funds of School Board candidates, just as they contribute to campaign funds of every other governmental unit which has any money to invest.

Bendromeda Strain's picture

Interesting that RI dumped Loeb and his success as well. The new Governor looks like the hag sister of Weingarten and was a  Wall Street hypocrite herself.