Bloomberg Businessweek - USA (2021-03-01)

F I N A N C E

33

20

Edited by

Pat Regnier

One investment for teachers’ retirement savings shows how

commodity traders can shape history

An Oil War in Your Pension

It’s not likely that any of Pennsylvania’s public

school teachers paid attention to it, but a brief

announcement in early 2018 held some unwelcome

news for their retirement savings.

Public pension funds have a reputation for being

conservative investors. Yet on March 19, 2018, a

terse corporate notice alerted the Pennsylvania

Public School Employees’ Retirement System

(PSERS) that its latest investment was anything but

bland. “We hereby inform you,” the notice began,

“that as a result of the independence referendum

held by Kurdistan Regional Government on 25th

September 2017, KRG’s exports have decreased by

almost 50% due to the takeover of Kirkuk oilfields.”

A sliver of the teachers’ retirement savings had

been directed to one of the most febrile regions

of the Middle East. They weren’t alone. In South

Carolina, the savings of more than 600,000 police

officers, judges, and other public-sector workers

had been funneled into the same investment. So had

the savings of the teachers, firefighters, and police

officers of West Virginia.

If the pensioners had looked at the annual reports

of their funds, they probably wouldn’t have been any

the wiser. Buried in the list of investments held by

their funds, they would have seen the name “Oilflow

SPV 1 DAC.” Digging a little deeper, they would have

found that Oilflow SPV 1 DAC was an Irish company

whose address was a nondescript, four-story build-

ing in central Dublin where some 200 other compa-

nies were also formally incorporated.

The most unusual element of Oilflow SPV 1 DAC

was how good an investment it looked to be. In a

world of ultralow interest rates, its notes, registered

on the Cayman Islands Stock Exchange, promised

to pay 12% annually over five years. Of course, the

high yield reflected that the investment product car-

ried a significant risk. For the pension funds, it was

Bloomberg Businessweek March 1, 2021