Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, May 17, 1990 TAG: 9005170328
SECTION: VIRGINIA PAGE: B4 EDITION: NEW RIVER VALLEY
SOURCE: Associated Press
DATELINE: RICHMOND LENGTH: Medium
Financial managers in other states said narrowing the field of stocks in which state funds are placed naturally limits the possibilities for high yields.
"You have to think of this as one of those things like drawing cards out of a deck. If you reduce the number of cards, you're not going to get as many full houses," said Roland Machold, director of New Jersey's Division of Investments. "That's not sort of a political statement. That's simple mathematics."
New Jersey lost as much as $500 million by divesting $4.2 billion in South African-linked holdings between 1985 and 1988, the Wall Street Journal estimated.
Machold had no official figure but did not dispute the estimated loss. He said losses were hard to avoid because profitable pharmaceutical, oil, automobile and computer companies do business in South Africa. For example, he said, international oil company stocks soared after the state divested.
Connecticut gradually sold its South African-tied holdings during the 1980s and has invested in more small companies, said Maryellen Andersen, state director of investments and intergovernmental relations.
"We usually hold onto our stocks for a long time, a very long time. We had to sell them in many cases prematurely," she said. "We can't say that we really gained a lot of money by selling these stocks because of the opportunities that were lost."
Even before Iowa adopted a divestment policy in 1985, the state had sold many of its stocks in companies doing substantial business in South Africa, said Steven Miller, deputy state treasurer.
"There's no problems financially. It doesn't hurt the yield on investments. My biggest problem is remembering it," Miller said. "You've got to remember to check the South African list."
Gov. Douglas Wilder signed an executive order Tuesday that made Virginia the 27th state to adopt a divestment policy to protest racial segregation in South Africa. Wilder directed all state agencies and institutions to sell stocks in companies with "substantive interests" in South Africa and said he would like to see divestiture completed before his term ends in January 1994.
State officials have estimated the order will affect nearly $1 billion in investments held primarily by the state employee pension fund and colleges and universities.
Machold said Virginia may have an easier time than New Jersey because his state's law banned any company holdings in South Africa while Wilder limited his policy to companies with substantive interests.
"That could be very helpful in ameliorating the effects, any negative effects," Machold said.
by CNB