Members of the New America Alliance (NAA) knew they had a hot issue when they gathered in August outside Albuquerque to discuss the dismal level of Hispanic participation in public pension funds. Still, it was surprising that the Pension Fund Forum for Latino Legislators resulted in public hearings and policy proposals within two months. An Illinois Senate committee scheduled testimony on pension-fund management in October; meanwhile, pension funds themselves pressed the Securities and Exchange Commission to make it easier for shareholders to nominate director candidates.
At issue is changing the traditional structure of fund management, in which long-established financial service firms keep a tight grip on business, leaving little opportunity for newcomers – among them Hispanic-owned and Hispanic-managed financial firms. In Illinois, for example, Hispanic-owned financial companies manage only 0.001 percent of every dollar in the state's $108 billion pension system, according to state Senator Tony Muñoz, chairman of the recently formed Illinois Senate Select Committee on Public Pension Investments.
Public pension funds are a more than $7 trillion market, points out Martin Cabrera Jr., president of Chicago-based Cabrera Capital Markets Inc. and the NAA member leading alliance participation in the Illinois Senate hearings. "Some people look at minority access to them as a more pressing issue than education," Mr. Cabrera says. "This is not just about Latino businesses making more money. … It empowers us to give scholarships and contribute to nonprofits. Public pension funds are where the wealth and power are. It's big money."
Pension funds act as key sources of equity capital for business investments, says Maria del Pilar Avila, the NAA's executive director. Without participation from financial companies serving Hispanic enterprises, a disproportionately small amount of that capital filters down to the community level. "We [Hispanic workers] are contributing to these funds, and we have a right to have access to this capital," Ms. Avila maintains.
The nonprofit NAA, founded in 1999 after a meeting of 30 Hispanic leaders organized by American CityVista CEO Henry Cisneros and National Council of La Raza CEO Raul Yzaguirre, has an overall goal of making more capital available to expanding and start-up Hispanic companies. "The American Latino community has historically been undercapitalized in every key area of economic and capital availability for business and public purposes," its mission statement says. "Full participation of Latinos in the economic life of the nation cannot be achieved without addressing that undercapitalization."
In the pension-fund issue, the NAA has found a way to realize its goal. Mr. Muñoz's committee in the Illinois Senate examined initiatives to increase pension-fund participation by minority- and women-owned companies and minority and female investment professionals. It has looked at relevant state laws and methods of enforcing diversity among financial service suppliers. The panel invited testimony from pension-plan sponsors, public pension-fund trustees, brokerage houses, and money managers.
Why aren't Hispanic-owned and Hispanic-run companies participating more in managing public funds? "That's what we wanted to find out," says Monika Mantilla Garcia, co-chair of the NAA Capital & Private Equity Committee. Her committee has identified three immediate goals: increase the number of Hispanic-owned financial service companies, increase their access to capital, and increase the number of Hispanics with high-level MBAs who work at these firms.
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