SACRAMENTO, Calif. — The CalPERS board on Dec. 13 approved a $500 million allocation to create an internally managed alpha incubator for global equities.
The $180 billion California Public Employees' Retirement System, Sacramento, will pursue low-risk, quantitatively driven strategies that could eventually be developed into stand-alone strategies. Both long-only and absolute-return strategies will be considered.
Separately, CalPERS and Barclays Global Investors failed to come to terms on fees for management of two domestic enhanced equity index strategies, said Kathleen Taylor, managing director of BGI's U.S. institutional business. CalPERS spokesman Brad Pacheco confirmed the fund and BGI had failed to agree on fees.
BGI was one of 10 managers picked in June to run a combined $6 billion in U.S. enhanced equity index portfolios for the system. Rosalind Hewsenian, managing director at consultant Wilshire Associates, had noted at the time that BGI's fees for its "alpha tilt" products were a concern.
CalPERS has funded nearly $2.4 billion of the total allocation, and is considering speeding up the remaining investment, Christianna Wood, senior investment officer, told the CalPERS board on Dec. 13. Originally, CalPERS had planned to invest only half of the total in the first year.
To date, six of the remaining nine managers have been funded: Western Asset Management, $505 million; Smith Breeden Associates, $501 million; INTECH, $354 million; Quantitative Management Associates and Franklin Portfolio Associates, $353 million each; and Atlantic Asset Management, $300 million. Managers not yet funded are Goldman Sachs Asset Management, PIMCO and State Street Global Advisors.
The CalPERS board also approved renewing one-year contracts for the fund's two currency overlay managers. Pareto Partners overlays $5 billion in international equity assets, and State Street Global Advisors overlays $1.9 billion. In addition, CalPERS staff briefed the board on plans to revamp the fund's currency overlay strategies. Staff wants to make returns equally important as risk, to cover all asset classes, and to make more tactical bets.
CalPERS will also encourage the SEC to act on its proposed rule that would give large institutions access to the proxy amid rumors that SEC Chairman William H. Donaldson might leave his post early next year.
Sean Harrigan, outgoing president, said the fund should reach out to other pension funds and mutual funds to "encourage Mr. Donaldson to do the right thing." Mr. Harrigan, a labor leader with the United Food & Commercial Workers, said the proxy-access rule is the most important issue in corporate governance. He added that Mr. Donaldson might leave the SEC "as early as April of this coming year."
Also, the role of two other SEC supporters of the rule remains in doubt. Commissioner Harvey Goldschmid's term has expired and he plans to leave the SEC by summer; fellow Democratic Commissioner Roel Campos has been quiet on the issue, Mr. Harrigan said.
"Chairman Donaldson plans to stay around as long as he feels he is being effective," SEC spokesman Matthew Well said. Mr. Donaldson has said "he will not abide by an arbitrary timeframe" for the rule-making, Mr. Well added.
