CalPERS staff has recommended a target list of 15 active emerging-markets managers to handle $1 billion to $1.5 billion. As previously announced, the $160 billion California Public Employees’ Retirement System, Sacramento, plans to convert its $1.5 billion in emerging markets assets — now all passively managed by State Street Global Advisors — to active management.
Firms on the list are: Alliance Capital; Sanford C. Bernstein; Capital Guardian; Deutsche; Dimensional Fund Advisors; Foreign & Colonial; Genesis; Grantham, Mayo, Van Otterloo; J.P. Morgan; Putnam; Rexiter; Schroder; SSgA; Franklin Templeton; and Wellington Management. If approved by the board, target firms will be solicited this month, with selections slated for November.
However, CalPERS consultant Rosalind M. Hewsenian, managing director at Wilshire Associates, worried Alliance Capital’s October purchase of Sanford C. Bernstein could result in significant organizational changes. She said she thinks their equity management platforms will be merged and she’s worried about "the resulting culture clash.” She also raised issues about Alliance’s stock price, and the possibility that further cost savings will be achieved by reducing professional staff. Ms. Hewsenian also raised a concern that key Sanford C. Bernstein executives remain under three-year employment contracts, noting the disruption experienced in a similar situation after UBS purchased Brinson Partners and "senior executives left en masse, including Gary Brinson.” Officials at Alliance would not comment.
