Pensions lose millions after bank collapse
Rick Schindler
- The collapse of Silicon Valley Bank has caused pension funds around the world to lose millions of dollars.
- The California Public Employees Retirement Fund and the California State Teachers’ Retirement System had invested in the bank, as did Korea’s National Pension Service and Sweden’s Alecta Pension Fund.
- The Federal Reserve has promised depositors their money is safe, but this has done little to allay concerns about the stability of the banking system.
Pensions around the world lost millions of dollars from the collapse of the Silicon Valley Bank (SVB).
Following SVB’s shutdown on Friday, several pension funds in the US and two overseas have confirmed they have investments in SVB stock, which is likely to make losses now that the bank has been shut down by federal authorities.
Just before the weekend, a bank run plunged the San Francisco-based financial institution into crisis as depositors made mass withdrawals. After being handed over to the Federal Deposit Insurance Corporation (FDIC), another smaller bank in New York, Signature Bank, was shut down by regulators on Sunday. The collapses were the second and third largest bank failures in US history, behind only the Washington Mutual crisis in 2008.
The closures are likely to spread to the rest of the US banking system, despite federal plans to stem the tide. This includes pension schemes, whose investments in SVB, while small compared to their portfolios, will total millions of dollars.
For example, the California Public Employees Retirement Fund (Cal PERS), which manages the nation’s largest public pension fund with more than 1.5 million members, had $67 million in SVB and about $11 million in SVB at the time of its collapse invested. With more than $440 billion in assets at the end of its most recent fiscal year, these investments make up a fraction of Cal PERS’ portfolio.
“These will be assets at risk, probably at a loss, but broadly a small percentage of our total portfolio,” the Cal PERS spokesman said news week. “We will continue to monitor the situation over the coming days and weeks and continue to be strategic, agile and patient as a long-term investor.”
The California State Teachers’ Retirement System, the nation’s largest retirement fund for teachers, also announced the same news week that the annuity held $11 million worth of SVB stock excluding bonds as of last Thursday. As of January 31, its assets totaled $311.5 billion.
It also has banking and lending exposures through its partners and advisors, but the pension said it was “encouraged” by the Federal Reserve’s promise that all depositors would be protected.
The Fed has vowed to bank customers that their money is “safe” and has reassured Americans that they should have faith in the system despite growing concerns in the financial sector. Many have speculated that other mid-tier banks may soon fall as depositors rush to withdraw more money.
There are also pensions in other federal states that are invested with the SVB.
Rhode Island’s Employee Retirement Scheme, which benefits thousands of retired state and local government employees, had invested just over $2.6 million in SVB, Signature and two other banks at risk of collapse: First Republic and Silvergate Capital. These investments represent a small percentage of the total fund, which is valued at more than $10.3 billion.
In the Indo-Pacific, Korea’s National Pension Service (NPS) – which manages the world’s third-largest public pension fund with assets of $800 billion – owns about 100,000 shares of SVB, which was valued at around $23.2 million at the end of 2022. According to local media reports, NPS is currently looking for ways to respond to the incident.
Across the Atlantic, Sweden’s largest pension fund, Alecta, which has over $104 billion in assets under management, has invested around $848.7 million in SVB and $282.9 million in Signature.
