Key Takeaways
- • The Indiana Public Retirement System (INPRS) is divesting roughly $170 million in Hong Kong holdings, more than two years after Indiana lawmakers banned investments in Chinese interests through Senate Enrolled Act 268.
- • Public equity divestment is expected to be complete by December 2025, according to materials for INPRS's Friday board meeting, and the agency is updating performance benchmarks to exclude Hong Kong-domiciled companies.
- • INPRS asset managers have already exited fixed income holdings in Hong Kong, where benchmarks reportedly had no exposure and required no changes.
- • The move follows a "recent clarification" of the law's intent after Indianapolis Star Deputy Opinion Editor Jacob Stewart questioned the agency's Hong Kong holdings in a September column, with the law's author saying the ban was meant to cover Hong Kong.
Summary
The Indiana Public Retirement System is divesting from holdings in Hong Kong worth almost $170 million, according to the Indiana Capital Chronicle, more than two years after state lawmakers banned investments in Chinese or Chinese-controlled companies and products. Materials for INPRS's Friday board meeting indicate that divestment from public equity assets should be completed by December, and the agency is working to update its performance benchmarks so they match the universe of permissible investments.
INPRS spokeswoman Carolina Rodríguez said benchmarks measure manager performance and must exclude Hong Kong-domiciled companies because managers will no longer be permitted to invest there. Asset managers have already pulled out of fixed income holdings in Hong Kong. The corresponding benchmarks for those assets showed "no exposure" to Hong Kong, so they did not need updating, according to the board book.
Senate Enrolled Act 268, passed in 2023 and effective May 2023, mandated divestment from a wide range of Chinese or Chinese-controlled entities and barred future investments in them. The law requires INPRS to identify restricted investments annually and to divest as soon as financially prudent, subject to statutory deadlines of at least 50% within three years of discovery, 75% within four years and 100% within five years. INPRS said it divested its $1.2 billion in Chinese and Chinese-controlled holdings last year, four years ahead of schedule.
The Hong Kong holdings were not included in that count. Indianapolis Star Deputy Opinion Editor Jacob Stewart, a former press secretary for the Indiana Senate Republican caucus, revealed the issue in a September column, arguing the investments pose a "clear national security risk." According to Stewart, INPRS cited Hong Kong's "separate constitution" in its position. The law's author, Sen. Chris Garten, R-Charlestown, noted that this document still describes Hong Kong as an "inalienable part" of China, and Stewart wrote that Garten intended the ban to apply to Hong Kong.
Rodríguez said INPRS "was able to gain further clarification on the intent of the legislation" through collaboration with legislative stakeholders, which allowed it to proceed with divesting Hong Kong holdings.
INPRS spokeswoman Carolina Rodríguez said benchmarks measure manager performance and must exclude Hong Kong-domiciled companies because managers will no longer be permitted to invest there. Asset managers have already pulled out of fixed income holdings in Hong Kong. The corresponding benchmarks for those assets showed "no exposure" to Hong Kong, so they did not need updating, according to the board book.
Senate Enrolled Act 268, passed in 2023 and effective May 2023, mandated divestment from a wide range of Chinese or Chinese-controlled entities and barred future investments in them. The law requires INPRS to identify restricted investments annually and to divest as soon as financially prudent, subject to statutory deadlines of at least 50% within three years of discovery, 75% within four years and 100% within five years. INPRS said it divested its $1.2 billion in Chinese and Chinese-controlled holdings last year, four years ahead of schedule.
The Hong Kong holdings were not included in that count. Indianapolis Star Deputy Opinion Editor Jacob Stewart, a former press secretary for the Indiana Senate Republican caucus, revealed the issue in a September column, arguing the investments pose a "clear national security risk." According to Stewart, INPRS cited Hong Kong's "separate constitution" in its position. The law's author, Sen. Chris Garten, R-Charlestown, noted that this document still describes Hong Kong as an "inalienable part" of China, and Stewart wrote that Garten intended the ban to apply to Hong Kong.
Rodríguez said INPRS "was able to gain further clarification on the intent of the legislation" through collaboration with legislative stakeholders, which allowed it to proceed with divesting Hong Kong holdings.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.