White House presses railroad pension fund on China investments

By Brian Croce for pionline.com

White House officials have raised economic, national security and humanitarian concerns over the National Railroad Retirement Investment Trust’s investments in Chinese companies.

However, some of the issues raised in a letter sent Tuesday from Larry Kudlow, director of the national economic council, and National Security Adviser Robert O’Brien to Erhard R. Chorle, chairman of the U.S. Railroad Retirement Board, are misplaced, Mr. Chorle said in response Wednesday.

The National Railroad Retirement Investment Trust manages $25.4 billion in assets and is an independent non-federal entity governed by a seven-member board. The trust’s investment authority is not subject to approval or direct oversight of the railroad board.

The White House officials said the trust’s investments fund Chinese companies — the total amount of which could not immediately be learned — that pose a substantial risk to American railroad retirees as well as the nation at large. “Many of these (People’s Republic of China) companies operate in violation of U.S. sanction laws and assist the PRC’s efforts to build its military and oppress religious minorities,” the letter said.

The officials specifically mentioned companies such as Hikvision, which they said manufactures surveillance equipment, and telecommunications company ZTE as problematic.

In response, Mr. Chorle said the trust, over which he reiterated the board has no investment decision control, “assured” the board in mid-June that it held no interest in either Hikvision of ZTE.

Mr. Chorle said there may be some confusion as to some of the trust’s holdings based on its use of the MSCI ACWI ex-U.S. Investable Market index as a benchmark to measure the performance of its non-U.S. equity investments, which may include Hikvision or ZTE.

“(The trust) does not actually invest in that index however,” Mr. Chorle said. “As to future investments or companies which you may not have mentioned, we will certainly be willing to engage in future dialogue in that regard.”

The letter from White House officials said there’s currently “mounting uncertainty” when it comes to China’s relations with the rest of the world. “Such concerns include the possibility of future sanctions or boycotts that may arise for a wide range of issues, including the culpable action of the Chinese government with respect to the global spread of the COVID-19 pandemic, the suppression of Hong Kong’s democracy, the purchase of Iranian oil in contravention of U.S. sanctions, gross human rights violations in the Xinjiang region, the militarization of the South China Sea and threats to freedom of navigation.”

Mr. Chorle said the board was unsure whether the trust has given specific consideration to future sanctions or boycotts, but said it will make an inquiry.

“Please know that we are taking these issues and your concerns seriously, but also know that we have limited authority as regards the investment decisions made by NRRIT and their advisers/managers,” Mr. Chorle said.

White House Economic Adviser Larry Kudlow expressed concern over the National Railroad Retirement Investment Trust’s investments in Chinese companies.

The Trump administration raised similar concerns in May with the Federal Retirement Thrift Investment Board, Washington. The board, which oversees the $612 billion Thrift Savings Plan, had plans to shift billions of dollars in retirement assets to an index fund that includes Chinese companies.

After initially making the decision in 2017 and reaffirming it in November, the board in May paused the planned shift, citing the COVID-19 pandemic and newly nominated board members. President Donald Trump nominated three people to the five-member in May, who, upon Senate confirmation, could form a new majority and reverse the decision, although no hearings have been scheduled yet.

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