Trustee Mismanagement Continues

In the latest round of disclosures from the AFM-EPF, their own documents reveal that our trustees continue to have trouble managing our pension fund. They've attempted to educate themselves by attending conferences and taking courses, and we applaud them for making the effort. But the truth is, we have a group of trustees with little financial or actuarial experience, trying to manage our collective financial futures at a very complicated time. Once again MPS calls for new trustees to be brought onto the pension board who have the expertise and insight to help do the job properly. As long as the trustees refuse to reform themselves, no one should be surprised to see the mismanagement of the past ten years continue to damage our Fund in the future.

Unfortunately, at the AFM convention that concluded on June 20, the trustees conducted an intense lobbying campaign in opposition to a proposal that would have added an investment expert and an actuarial expert to the Fund's Board of Trustees. Armed with teams of lawyers, and supported by political allies, the trustees succeeded in killing the proposal. In the coming weeks we will provide you with our full take on what happened at the Convention, but for now, we need to take stock of what it might mean for rank and file plan participants.

The trustees’ mismanagement is not confined to the past. Recent documents from the trustees’ files confirm that they continue to under-perform in the critical area of investments.

These documents reveal that Cambridge Associates, the new investment manager, hired by the trustees in 2017 to serve as the funds Chief Outside Investment Officer (CIOI), is not adding value. In fact, Cambridge Associates added negative value since they were hired, and as measured over calendar year 2018. (Cambridge Associates Presentation, February 2019, page 15.)

It is noteworthy that under Cambridge Associates, the AFM-EPF is betting heavily on alternative investments. 36% of the fund is now invested in private equity and hedge funds. (Cambridge Associates Presentation, page 37.) This is far from a plain vanilla portfolio of stocks and bonds. It takes a sophisticated board of trustees to evaluate private equity and hedge fund managers.

One example of this is the AFM-EPF’s investment in the Abrajj Group, a private equity fund specializing in emerging markets. (Cambridge Presentation, page 45.) The Dubai-based fund recently collapsed in a cloud of allegations of improper financial dealings, and liquidators are trying to settle about $1 billion in debt. Our Fund stands to lose millions in this fiasco.

None of this inspires confidence in the trustees’ ability to provide good stewardship for this pension plan in the coming years. Nor is it helpful that the past several months, the trustees have steadily restricted access to information about our pensions. They no longer provide access to any of their committee presentations. They deny access to actuarial documents like experience studies, and they refuse to provide analyses of potential cut scenarios. And other than a few exceptions by individual Trustees, they are unwilling to engage as a Board in any live setting with their understandably anxious Rank and File. They have retreated behind a wall of lawyers and communications consultants and plan our financial futures behind closed doors.

As MPS has stated before, the coming round of cuts will not necessarily be the last. Nothing in the law prevents the current trustees from cutting our pensions multiple times over the next five to ten years (assuming government approval). If the trustees' mismanagement continues, plan participants will likely face a future even more uncertain than the one we face now.