The California Public Employees’ Retirement System has authorized staff to invest up to $600 million alongside successful partners in the CalPERS Corporate Governance Program.
CalPERS took the action following reports that its 10 external corporate governance funds had achieved annualized returns of 17.7 percent from their inception in January 1999 through March 31, 2006 – almost three times more than the industry benchmark.
Two of those funds – Relational Investors, LLC and Knight Vinke Asset Management – gained 31 percent on direct co-investments with CalPERS in under-performing companies in the United States and Europe. The benchmark going back to their inception in November 2002 was 15.4 percent.
"The figures tell the story, and it’s all good news," said Rob Feckner, CalPERS Board President. "By improving poor financial performers, our corporate governance investments show that we can do very well by doing good in the marketplace."
To expand the program, staff will co-invest alongside four additional corporate governance managers from the present program pool of 10 partners. CalPERS staff will be able to make up to three co-investments totaling $150 million in all in SPARX, Shamrock, Hermes European Focus Fund, and Taiyo Pacific Partners.
CalPERS staff would draw the $600 million from domestic and international equity passive accounts to augment $4.4 billion currently allocated to the Corporate Governance Program.
Besides the six partners already named, New Mountain Capital, Blum Capital, Breeden Partners, and Governance for Owners will remain in the corporate governance investment program.
"We’re looking for continued good returns for corporate governance funds, considering their extraordinary results, especially for co-investments," said Charles P. Valdes, Chair, CalPERS Investment Committee. "Expanding this program is a good idea."
In other action, CalPERS decided to renew contracts for four active managers and nine enhanced indexing managers in the pension fund’s Domestic Equity Program. They are (Active) AllianceBernstein L.P.; The Boston Company; Geewax, Terker & Company; Pzena Investment Management; (Enhanced Indexing) Atlantic Asset Management, Barclay’s Global Investors, Franklin Portfolio Associates, Goldman Sachs Asset Management, INTECH, Quantitative Management Associates; Smith Breeden, T. Rowe Price, and Western Asset Management Company.
One-year contract renewals were approved for 19 international managers: (Active All-World ex-U.S. Equity) Acadian Asset Management; AllianceBernstein Growth; AllianceBernstein Value; Arrowstreet Capital; Baillie Gifford; Grantham, Mayo, Van Otterloo (GMO); New Star Institutional Managers; Robeco USA; (Enhanced Indexing Developed-Markets) AQR Capital Management, Barclay’s Global Investors, Baring International Investments, Quantitative Management Associates; (Active European) AXA Rosenberg, Capital Guardian; (Active Pacific Basin) Nomura Asset Management; (Active Emerging Markets) AllianceBernstein, Dimensional Fund Advisors, Genesis Asset Managers; (Passive Developed Markets Equity Index Fund) State Street Global Advisors.
The Investment Committee also heard a report that the System has engaged 94 portfolio companies about potential business in Sudan, which has been cited for human rights violations. In May, CalPERS banned investments in nine other companies that do business in Sudan. More than half of the companies that CalPERS initially contacted for information but did not respond were sent a second request letter on August 14, 2006. The System also is continuing efforts to identify new, reliable third-party consultants to help identify companies that may be operating in Sudan.
CalPERS is the nation’s largest public pension fund with assets totaling more than $210 billion. The System provides retirement and health benefits to more than 1.4 million State and local public employees, retirees, and their families. For more information, visit www.calpers.ca.gov.
