Despite UC demands that Cerberus Capital Management sell a firearms manufacturer associated with the Newtown, Conn., shootings, complications in the sale have prompted the possibility that the university may withdraw significant investments from the firm.
The UC Retirement Plan has more than $35 million invested in Cerberus Capital Management, a private equity firm that owns Bushmaster Firearms International, the company that manufactured the rifle used in the massacre. About $1 million of the investment is held in Bushmaster, according to UC spokesperson Dianne Klein.
While UC officials have demanded that Cerberus sell Bushmaster, fear of bad publicity has made it difficult for the firm to sell the firearms manufacturer.
Many top investment banks, including JPMorgan Chase and Goldman Sachs, would not help Cerberus in the sale of Freedom Group, a group of firearms companies including Bushmaster, or represent potential buyers, according to a Jan. 18 report from Bloomberg.
Klein said that UC officials only recently became aware of the firm’s holdings in Bushmaster and that the manager of the fund made the decision to invest in the firearms manufacturer.
“The UC, with other investors, has faith in the manager of the fund,” Klein said. “They don’t tell you what they’re going to invest in. You say, ‘this person knows what they’re doing.’”
Klein said if Freedom Group were not sold, she was uncertain whether the university could keep its money with Cerberus without supporting Bushmaster. She could not say if the university would make a full withdrawal.
Still, she affirmed the university’s position that it would not invest in any way in companies that manufacture, sell or distribute firearms, calling into question the future of the UC Retirement Plan’s investment in Cerberus if Freedom Group cannot be sold.
A representative from Cerberus could not be reached for comment.
“We are willing to sacrifice potentially large returns on investments in firearms,” Klein said in an email. “And, no, we would not reconsider the decision if the returns shot up.”
Freedom Group reported sales of $677 million over the first nine months of 2012, representing a 20 percent increase in revenue compared to the same period in 2011.
Currently, the UC Retirement Plan faces a roughly $11 billion unfunded liability.
ASUC External Affairs Vice President Shahryar Abbasi said he agreed with the UC policy of “ethical investing,” or forgoing possibly lucrative investments in industries the university did not support.
“My position is that most people are in favor of socially responsible investment practices,” Abbasi said. “Now the question comes down to how they can get their money out of these investments.”
Jeremy Gordon covers higher education. Contact him at [email protected]