Nebraska Investment Council outlines $575M losses from proposed China divestment

The Nebraska Retirement Systems Committee meeting on February 28, 2025, spotlighted the significant financial repercussions of proposed divestment from Chinese investments, with estimates indicating a staggering loss of $575 million in revenue and an additional $22 million in expenses. These figures, derived from expert analysis and historical data, underscore the potential impact on the state's financial health.

The Nebraska Investment Council (NIC) warned that divesting from China could force the state to hire less successful fund managers, resulting in a performance drop of 2.7% annually, equating to a revenue loss of $179 million. Furthermore, the council highlighted that the difference between top-performing private market funds and medium ones could lead to an additional $330 million loss each year. The immediate financial toll of selling off private market funds with Chinese holdings is projected at $68 million, alongside increased management fees of $18 million annually.

Committee members expressed concerns about the urgency of divestment, interpreting the directive to act "as soon as practicable" as a potential fire sale, which could exacerbate losses. The NIC emphasized the importance of a methodical approach to managing state assets, advocating for the council's autonomy in making investment decisions rather than imposing blanket restrictions.

In summary, the NIC's track record of outperforming peers and the existing safeguards against risks from China were highlighted as reasons to reconsider hasty divestment. The committee's discussions reflect a critical balancing act between ethical investment practices and the financial stability of Nebraska's retirement systems, with further analysis needed to navigate this complex issue.