The Dark-Money Lobbying Group Going After Pension Funds

Illustrations by Michael Marsicano

Illustrations by Michael Marsicano

The Institute for Pension Fund Integrity claims it wants to keep politics out of pension funds. But what does it really want?

In an era when a television star is president and celebrities regularly wade into political matters, an organization devoted to keeping politics out of something — anything — seems refreshing.

Enter the Institute for Pension Fund Integrity.

The impressively named group began its campaign to “keep politics out of pension funds” roughly a year ago, launching in April 2018. Since then IPFI has released several white papers covered by Reuters, Barron’s, Institutional Investor, and other mainstream publications. It has submitted reports to the Securities and Exchange Commission roundtable and targeted specific U.S. public funds, including New Jersey’s and Washington State’s.

Founder Christopher Bancroft Burnham claims that IPFI is working to depoliticize pension funds and make performance information more accessible.

But in practice the organization primarily attacks divestment initiatives and environmental, social, and governance (ESG) programs. The information it publishes on public funds is frequently rife with errors and seemingly self-serving data. And for someone striving to make pensions nonpartisan, Burnham has deep political ties. He served on President Donald Trump’s transition team in 2016, and was recently subpoenaed by the House Judiciary Committee as part of its investigation into potential abuses of power and illicit campaign activities.

Plenty of powerful entities stand to benefit from IPFI’s work. American public pension funds are massive investors in global markets, and often among the top shareholders in oil companies, arms manufacturers, and firms in other controversial sectors. As far as the group succeeds in derailing divestment efforts, those industries win.

The most obvious question about IPFI — who is paying for it? — the founder refuses to answer.

Burnham says his group has received two donations so far, but will not name the donors. “Our policy is that we’ll take money from anybody who has our shared vision of keeping politics out of the management of public pension money,” Burnham said by phone in March. “One of your fellow reporters asked, would I take money from the Koch brothers? They haven’t donated, but I would certainly take money. I would take money from the Koch brothers.”

IPFI is a nonprofit operating under the structure typically used by political lobbying groups, the 501(c)4. Burnham says he regrets the decision to set up in that category, versus the 501(c)3 popular for nonpartisan groups. Thanks to its structure, IPFI has the freedom to wield its message but has potentially narrowed its donor base.

“A 501(c)3 can’t do any political activity, and it can only do a tiny little bit of lobbying,” explains attorney Douglas Varley, who specializes in nonprofits but is not specifically familiar with IPFI. “A 501(c)4 can do a lot of politics and a lot of lobbying.” Both types are exempt from corporate income tax, Varley says. “A 501(c)3 has other benefits, the most important of which is that donors can get a charitable deduction when they contribute to a 501(c)3.” Whatever people or organizations have funded IPFI thus far, they didn’t do it for the tax write-off.

Who, exactly, is providing the money is a question that concerns some of the people IPFI is targeting.

“Sometimes it’s really hard to figure out who is behind these groups,” says Kentucky Retirement Systems’ interim chief investment officer, Rich Robben. “It wouldn’t surprise me if it was somehow related to fossil fuels.”

Robben’s pension fund has been on the receiving end of inaccurate IPFI information. According to the nonprofit’s website, “The Kentucky State Retirement System [sic] saw its funded liabilities drop from 16 percent in 2016 to just 13.6 percent funded in 2017. The prospects for fiscal year 2018 are even more dismal, as rate of return on investments are [sic] still too optimistic at 7 percent.”

Says Robben by phone, “We changed that a year ago. The assumed rate of return for the plan that we mentioned here is 5.25 percent, which I’m pretty sure is the lowest in the country.”

The IPFI website’s dedicated page on Kentucky seemingly once linked to a full IPFI report on the retirement system, which has since been taken offline. This is one of many instances of outdated or false information appearing live on the website, where many links to its supposed sources are broken.

For example, on its New Jersey State Pension Fund page, IPFI declares that total pension debt is $253 billion, according to “the new accounting standards introduced by WNYC.” WNYC is the public radio station serving New York and surrounding areas. That figure connects to a “file not found” page, as do two thirds of the dozen or so links in New Jersey’s brief profile. Likewise, the group’s report “ESG Investing for Public Pensions: Does It Add Financial Value?” includes a case study on the New Jersey State Investment Council, which runs its pension funds. The report, published September 25, 2018, names the Division of Investment director as Chris McDonough. But McDonough hadn’t been in that role for months.

Every publisher makes mistakes. Yet IPFI stands out for the sheer volume of errors, which remain uncorrected. Sloppiness may just be the result of the young nonprofit’s ambitions exceeding its resources. “From my point of view, their philosophy is one that makes sense,” says Chris Phillips, director of institutional relations and public affairs for the Washington State Investment Board. However, IPFI’s website includes a minor error about WSIB’s funded status. Phillips adds, “I get frustrated when there’s misinformation. Either side is capable of that.”

Minor oversights, like those about Washington’s and New Jersey’s funds, could be chalked up to growing pains. Add those to foundational errors, however, and some are questioning the integrity of the Institute of Pension Fund Integrity.

In an October 2018 report on the proxy process submitted to the SEC roundtable and published online, IPFI claims that proxy advisory firms Institutional Shareholder Services and Glass Lewis are investment firms, “with financial stakes in various companies and industries, allowing for conflicts of interest.”

Neither Glass Lewis nor ISS is an investment firm.

“Obviously, we are not an investment firm, and if ‘with financial stakes in various industries’ is meant to imply that we own stock in publicly traded companies directly or on our clients’ behalf, that’s obviously not true either,” a spokesperson for Glass Lewis said via email. A spokesperson for ISS declined to comment.

The report also claimed that Glass Lewis is “owned and operated by the Ontario Teachers Union, with obvious conflicts of interest occurring when businesses operate in ways interpreted as ‘anti-union.’”

Although it is true that Glass Lewis is in part owned by the Ontario Teachers’ Pension Plan Board (it’s co-owned by Alberta Investment Management Corp.), Glass Lewis’s own website says that neither is involved in the day-to-day management of the business, or in the formulation and implementation of its proxy voting process.

The report also employs sleight of hand when it comes to talking about private equity investing. “Pension funds continue to shift more of their money from fixed-income assets to private equity,” it says. “Today these equity holdings make up as much as three quarters of pension fund holdings.”

When asked in November 2018, IPFI chief of staff Molly Hall said via email that the “three quarters” number referred to the combined value of all public equities and alternatives, drawn from a Pew Trust survey from 2014.

The report “ESG Investing for Public Pensions: Does It Add Financial Value?” likewise includes incorrect information on how ESG investments perform in comparison to benchmarks.

It quotes a 2016 study from the Center for Retirement Research at Boston College. According to the IPFI report, “The results showed that the rate of return on the plans engaged in ESG investing tended to be lower by almost 40 basis points.”

This is not true. The report IPFI quoted shows that the underperformance of almost 40 basis points took place at pension funds where divestment laws had been passed, not when funds engaged in ESG investing.


Christopher Bancroft Burnham

IPFI’s office sits on the 21st floor of a corporate office building in Arlington, Virginia, just one metro stop away from Washington, D.C. The office houses Burnham’s three major ventures: Eastport Analytics, the data provider that Burnham chairs; his venture capital firm, Cambridge Global Capital; and, of course, the Institute for Pension Fund Integrity.

Burnham’s own office is in the corner of the floor, past glassy conference rooms, a television playing CNN, and an office kitchen stocked with seltzer. Full of light on an early spring day, the windows look out on trees starting to bloom.

The desk is messy with papers and business cards, reined in, at least in part, by a fish-shaped paperweight. Burnham is a fisherman, catching rockfish and trout in his spare time.

Mementos from his time in the Marine Corps fill the windowsill. He points out a photo of himself outside of “Saddam’s spider hole” — the site where Iraqi dictator Saddam Hussein was captured. A nutcracker resembling Hillary Clinton is on display, still in its box. Her thighs, apparently, can be used to crush nuts.

To Burnham, and IPFI, getting politics out of pension funds means that funds are focused on their fiduciary duty to get the best returns possible for plan participants. Notions of divesting or even factoring in ESG concerns suggest personal and political agendas at play, he believes.

“Good governance is that you don’t play politics,” Burnham said in an April interview. “You don’t play politics with shareholder money; you don’t play politics with pension money. Play politics with your own money.”

His career in pension funds and politics dates back to 1994, when Burnham was elected as Connecticut’s state treasurer. At the time, Connecticut’s state pension fund was one of the worst performers in the United States, according to Burnham. He managed to turn things around for the $15 billion retirement fund by moving it from actively managed investing to being 75 percent invested in index funds, he says.

Burnham resigned in 1997 to take a role at Columbus Circle Investors, a subsidiary of PIMCO at the time. The move was criticized by Connecticut Democrats and the State Ethics Commission as a possible conflict of interest, given that Burnham had awarded Columbus Circle investment contracts just over a year before his resignation, The New York Times reported in 1997.

When asked about this move, Burnham says: “I had a one-year-old baby, a pregnant wife, a mortgage, and I was the fourth-lowest-paid treasurer in the nation. So after fulfilling what I felt was what I had promised to do from a campaign standpoint, and after lengthy discussions with my wife, I decided to take care of my growing family needs and go back into the private sector.”

Controversial career moves have come more recently, too.

In 2016, Burnham was tapped to join President Trump’s transition team, where he says he advised Rex Tillerson, who served for about a year as secretary of state. According to Burnham, he worked in that capacity for roughly two and a half months. He adds that he had previously advised President George W. Bush on his transition.

In March, Burnham was among the 81 agencies, entities, and individuals subpoenaed by the House Judiciary Committee as part of its “Threats Against the Rule of Law” investigation. Burnham said in the April interview that he doesn’t know why he was included in the subpoenas, which also went to Donald Trump Jr. and Steve Bannon, former White House chief strategist.

Burnham had raised eyebrows by accepting board seats at Russian aluminum giants En+ and Rusal, both formerly led by Oleg Deripaska. The oligarch’s ties to Vladimir Putin led to U.S. Treasury Department sanctions against the two firms in December 2018. Burnham joined the boards when sanctions loosened in January. The majority of the companies’ directors have to be European or American and independent, which Burnham says is why he was picked.

“Chris is one of those larger-than-life characters who understood the investment business,” says Kevin Parker, who hired Burnham to work for him at Deutsche Bank. “Chris will kick down any door or go through any door. He thinks fast on his feet. He’s great with dropping names. He knows tons of people. He can just go in and talk to anybody.”

Indeed, Burnham has gotten the attention of some of the U.S.’s largest investment funds with remarkable efficiency. IPFI has just two part-time employees: he and chief of staff Molly Hall, a senior account executive at Cambridge Global Advisors, the advisory arm of Burnham’s investment firm. Add in two anonymous donors, a board of former public officials, an august moniker, and a few provocative white papers. Suddenly, California’s giant teachers’ pension fund (CalSTRS) and New York State’s finance chair will answer to one’s critiques — even if only to wave them off.

A CalSTRS spokesperson says that IPFI’s position on its divestments and ESG policies did not sway the fund’s work. “We are well aware of our fiduciary responsibilities. That is why we have detailed policies and processes in order to enact divestment,” the spokesperson wrote via email. “CalSTRS prefers active engagement with our holdings and reserves divestment as a last resort when engagement cannot adequately address ESG concerns.”

But who is engaging with CalSTRS and other public pension plans via the Institute for Pension Fund Integrity remains entirely unclear. When given the chance before publication of this article to clarify who was backing him, Burnham once again chose to keep his funding sources dark.