There are at least two dozen state and local pension funds with direct exposure to the failure of Silicon Valley Bank (SVB).
State and federal regulators closed Silicon Valley Bank on March 10 as it faced a destabilizing bank run. As the 16th largest bank in the US and a popular finance partner of the Silicon Valley start-up community, it has sparked a wide range of financial fall out. It is the largest bank failing since Washington Mutual in 2008.
Below is a list of pension funds that we know have some exposure to the SVB collapse. These pension funds are either directly invested in SVB Financial Global stock or hold a stake in a company that banked with SVB. This data is compiled from reported stock holdings during this quarter —either SEC filings or public disclosures on the pension fund's website — and announcements from companies that banked with SVB. Later on in this article we have more details about what specifically landed any given pension fund on this list.
Pension Funds with Direct Exposure to the Silicon Valley Bank Collapse
|Pension Investment Fund
|SVB Financial Reported Value
|Signature Bank Reported Value
|California Public Employees Retirement Fund
|Ohio State Teachers' Retirement System
|New York State Common Fund
|Washington State Investment Board
|New York State Teachers’ Retirement System
|Florida Retirement System (State Board of Administration)
|Colorado Public Employees Retirement Association
|California State Teachers’ Retirement System
|North Carolina Total Retirement Plans
|Wisconsin Retirement System
Note: *Data updated based on recent statement from retirement system. | **WSIB data is as of June 30, 2022; VRS data as of March 31, 2022. | All other data reported in 2023 Q1 via 13F SEC filings. Dollar amounts are stock values at the date of reporting and likely vary from the value in the days right before SVB failed.
We'll be posting updates on new data and public statements in the "Updates & Statements" section at the end of this article as they arise.
This is only a partial list of pension funds who have stock holdings in SVB Financial Global. The SEC does not require the same kind of disclosures from pension funds who use external asset managers to invest in public stocks. There are likely many other pension funds with exposure through index funds, mutual funds, hedge funds, or private equity. The largest shareholder in SVB Financial was Vanguard, holding about 10% of the stock. Asset management firms Blackrock and State Street were among other top investors. Additionally, any of these pension funds might have sold their SVB stock in the days leading up to the crash and have not yet reported it.
Whatever the exposure to SVB related stock, the total losses so far are minimal compared to the size of these pension funds' total assets. There are hundreds of millions in losses. But, measured against hundreds of billions is assets these are not destabilizing losses on their own.
However, there is clearly some degree of contagion related to the SVB collapse. This includes Signature Bank being closed simultaneously - also with dozens of pension funds invested in their stock. Additionally, the market shocks created by the Credit Suisse bank destabilization today are part of the larger trend. In that sense, the broader concern is simply exposure to volatility. This is an on-going challenge for pension funds of which or pension funds of which this is just the most recent unsettling event.
How Are Pension Funds Affected by the Silicon Valley Bank Failure?
There are at least three ways that public pension funds have been affected by SVB's collapse that we know of so far:
- First, losses on SVB stock: There were at least 26 public pension funds whose SEC filings during the past two months showed an investment in the parent of Silicon Valley Bank, SVB Financial Group. There are others who will be exposed to these losses through money managed externally or in mutual funds.
- Second, losses on the public stock of companies affiliated with SVB: This includes companies who had substantial banking relationships with the failed bank, like Roku or Etsy. It also includes the stock of other banks. The contagion effects of a bank run that the FDIC and Federal Reserve have been trying to prevent could extend to other banking institutions. Maybe the Federal supports prevent this from happening, but it's not a guarantee.
- Third, lower valuations for private companies that had financing facilities with SVB: If pension funds are invested in these companies, it will negatively impact the value of those assets on their balance sheets. This would include dozens if not hundreds of companies that might have financial stress because of the bank collapse. The risks to pension funds would be lower returns on their private equity portfolios as a result.
Over the weekend, federal officials announced programs that would backstop SVB’s depositors and keep them whole. They also created a program to backstop deposits at all other banks in the U.S. should financial institutions need the support. Together, these programs could ensure confidence in companies linked to SVB. It also ensures small companies depending on deposits at SVB to make payroll won’t run into severe cash flow problems.
However, it is still likely that there will be some private companies that will suffer lower valuations as a result of the SVB collapse. This will have a knock on effect for the projected returns on private equity investments from pension funds. The federal support and bailout programs likely won’t cover the lines of credit that start up companies might have with SVB to manage irregular periods of cash flow. Nor will they necessarily guarantee the return of cash in money market mutual funds.
These challenges could lead to payroll crunches, lost business development resources, or even company failures. Alternatively, funding shortfalls in the near-term could require the investment firms backing the start ups and small companies in trouble to provide temporary financial support. And they could potentially use money invested by pension funds.
The Transparency Challenge in Figuring Out Which Pension Funds Are Exposed
It is impossible to know the full scope state and local pension plan exposure to SVB financial fallout using only public documents.
Many of state pension funds do not publish their equity holdings. Among the 92 pension "funds" (e.g. retirement system trustees, treasury departments, or investment commissions) that manage the assets of the country's largest state and local "retirement plans," less than a third have up-to-date SEC filings related to their public equity investments. And most pension funds tend to conceal their private capital investments.
For example, the Ohio State Teachers Retirement System (Ohio STRS) doesn’t publish anything on their website listing the public equities that they own. But Ohio STRS has filed reports with the SEC about their various transactions. This includes a 13F report from January 2023, where you can see where they’ve invested. And as of their last report, Ohio STRS had 171,000 shares of SVB stock worth around $40 million. This was the largest reported amount directly held by a U.S. pension fund in the failed bank. (After the SVB collapse, Ohio STRS released a statement that the value of their shares had fallen to $27.2 million in the days before the collapse.)
By contrast, the New York State Teachers Retirement System (NY STRS) publishes a full list of every domestic equity they hold on their website, in addition to federal filings. Using NY STRS public reporting, we can see that as of March 10, 2023 they were reporting 70,153 shares in SVB Financial Global worth $16 million.
At least there are SEC filings for Ohio STRS though. Dozens of other state and local pension funds do not have readily public reports in the SEC's database, nor any specific public equity disclosures on their own websites.
Ultimately the SBV losses are small dollar amounts of exposure relative to the tens of billions in assets that Ohio STRS, NY STRS, and other public retirement systems manage. However, if you are a retiree or member of either pension fund, you might not be sure what kind of damage the bank failure has done. Stakeholders in NY STRS can visit their pension fund’s website, go to “investments” then view “portfolio” and download a list of “domestic equity holdings.” They use relatively straightforward terms in easy to find places, making it simple for stakeholders. The average stakeholder in Ohio STRS is unlikely to be familiar with navigating the SEC’s EDGAR database. This makes it much more difficult to figure out something similar for their pension fund.
So, in some respects, the exposure of various pension funds to the Silicon Valley Bank failure isn’t the main story. Yes, some pension funds will lose money because of this bank failure, but it won’t cripple any of them. Instead, the lack of transparency among pension fund investments is more troubling. And the SVB story is just another example of how certain pension funds do not have a lot of sunlight on their investments.