CalPERS staff wants greater latitude in managing its $115 billion global equity portfolio. In a memo to the board, staff proposed establishing ranges for subasset classes, including a request for immediate permission to expand the fund's corporate governance investment program, which is bumping up against its 3% of global equities limit.
Staff proposed adopting both anticipated target ranges and broader ranges for subasset classes: 55% to 85% for passive, with a broad range of 50% to 100%; 10% to 30% for active management and enhanced indexation, with a broad range of zero to 40%; and 1% to 5% each for alternatives, including corporate governance, the manager development program and absolute-return strategies, with a broad range of zero to 16% for the entire group.
"As the equity asset class has grown to over $115 billion, seeking approval for specific dollar amounts is no longer efficient or practical," according to the memo from the staff at the $186.9 billion California Public Employees' Retirement System, Sacramento. Consultant Wilshire Associates Inc. endorsed the proposal.
Wilshire also recommended that CalPERS' managers be permitted to invest in Chinese and Russian stocks that are sold in form of American Depository Receipts and Global Depository Receipts, even though those countries do not qualify for investment under CalPERS' permissible emerging markets policy. In a preliminary proposal, Wilshire noted that 71% of Chinese stock market capitalization and 31% of the Russian market cap trade in depository form, which must meet stock exchange standards for transparency, financial strength and accounting soundness.
The proposals will be considered by the CalPERS investment committee on March 14.