CalSTRS teachers' fund reviewing private equity gun investments

NEW YORK Mon Dec 17, 2012 6:05pm EST

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NEW YORK (Reuters) - The California State Teachers' Retirement System (CalSTRS) said on Monday it was reviewing its investments with Cerberus Capital Management LP, the private equity firm that controls Bushmaster Firearms International, in light of last week's the school shooting in Connecticut.

With $155 billion in assets under management, CalSTRS is the largest teachers' fund and the second largest pension fund in the United States, making it an influential voice in the investment community that may influence other investor funds in reaction to the shooting.

"At this point our investment branch is examining the Cerberus investment to determine how best to move forward given the tragic events of last Friday in Newtown, Connecticut," Ricardo Duran, a spokesman for the public pension fund manager, said in an email.

CalSTRS had invested $751.4 million with Cerberus by the end of March 2012, according to its website. Cerberus owns Madison, North Carolina-based Freedom Group Inc, which includes Bushmaster, the manufacturer of the AR-15 rifle used by the shooter in the Newtown killings.

Spokespeople for Cerberus and Freedom Group did not respond to requests for comment.

CalSTRS has disclosed investments in three Cerberus funds that were raised between 2003 and 2008. It was not immediately clear which of the three funds Cerberus had used to invest in Freedom Group or how broad was CalSTRS' review of its commitment to Cerberus.

Investments in private equity, which involve fund managers buying, reorganizing and then selling companies in a bid to make a profit, are notoriously illiquid. A private equity fund usually has a ten-year lifespan and investors wishing to exit may have to find another party willing to buy their stake in the fund.

Cerberus acquired Bushmaster in 2006 and later merged it with other gun companies to create Freedom Group, which reported net sales of $677.3 million for the nine months ending September 2012, up from $564.6 million in the corresponding period a year ago.

Founded in 1992 by Stephen Feinberg and William Richter, New York-based Cerberus has over $20 billion under management invested and shares its name with a mythical three-headed dog that in Greek mythology guards the entrance to the underworld.

Newtown's schools remained closed on Monday after a weekend of mourning that followed Adam Lanza's shooting spree on Friday that claimed 28 lives, including those of 20 young children, his mother's and his own.

Police said Lanza was armed with hundreds of bullets in high-capacity magazines of about 30 rounds each for the Bushmaster AR 15 rifle and two handguns he carried into the school, and had a fourth weapon, a shotgun, in his car outside.

A growing number of U.S. lawmakers - including a leading pro-gun senator - called on Monday for a look at curbing assault weapons like the one used in a massacre at a Connecticut grade school, a sign that attitudes toward gun control laws could be shifting.

(Reporting by Greg Roumeliotis in New York; editing by Gary Hill, Gary Crosse)

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