SACRAMENTO, Calif. — CalPERS wants its external money managers to eat their own cooking, but some managers might want to choose from a broader menu.
The board of the $165 billion California Public Employees' Retirement System, Sacramento, on March 15 adopted a sweeping code of ethics for the fund's external money managers and consultants, generated by the mutual-fund trading scandals. Other public funds are said to be looking at the policy.
But one controversial provision requires top management and portfolio managers at the investment management firms that work for CalPERS to invest a "material portion" of their current income or net worth in their firm's products. (CalPERS' consultants are exempt from this requirement.)
The idea is to better align the interests of the manager with its pension fund client by adopting a pay structure closer to those used by hedge funds and private equity managers, Christianna Wood, CalPERS' senior investment officer, explained to the board.
"We think it's appropriate for people who work on our account to have a portion of their capital, whether as a portion of deferred income or wealth generally," invested in company products, Ms. Wood said in an interview. "And we're finding that with the better firms, with better performance, they do this as a matter of course."