The Florida State Board of Administration (FSBA), which runs the $100bn Florida Retirement System (FRS), could soon be allowed to invest in tobacco stocks again, despite the objections of anti-smoking and health groups.
The FSBA's executive director Tom Herndon has called for a lifting of a ban that prevents the FSBA from investing in tobacco companies. In a memo - a copy of which was obtained by International Pensions News - to the fund's trustees (Florida's Governor Jeb Bush, State Treasurer Tom Gallagher and State Comptroller Bob Miligan) Herndon said that the ban limits investment opportunities, thus causing misfit which has a negative impact on investment performance.
Herndon, backed by FSBA consultants Ennis Knupp, said that having investment restrictions based on social, economic or cultural reasons was in direct opposition to the FSBA's duty to act exclusively in the best interests of its (FRS) members. He added that a repeal of the ban did not mean that the FSBA would automatically buy tobacco stocks.
Herndon's request for the ban to be repealed looks likely to succeed, as Bush, Gallagher and Milligan are in favour of lifting the ban.
The Florida Tri-Agency Coalition on Smoking, the American Cancer Society, American Heart Association and the American Lung Association are against any moves to remove the tobacco ban.
A spokesman for the Florida Tri-Agency Coalition said: Although the FSBA has a responsibility to maximise returns for the state pension fund, there are also moral and ethical responsibilities that sometimes rise above fiduciary responsibilities. This is one of those times. We should not be using money from Florida to support this industry.
The ban on investing in tobacco companies was adopted in 1997 by Florida's then Governor Lawton Chiles. At the time, the state was involved in a lawsuit against tobacco companies to recover healthcare costs attributed to smoking. Florida used its settlement money to set up trust fund to pay for children's and senior citizens health programs.
As well as tobacco, the FSBA is also banned from investing in Cuba and Northern Ireland. Herndon is also looking at getting those restrictions lifted.
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