CalPERS staff recommended adopting a country selection policy for investing in emerging-market debt based on credit ratings issued by major ratings agencies. Staff required that debt issued in developed markets carry a minimum rating of BB-, while local-currency debt and debt issued by local governments and corporations carry a higher BBB- minimum rating as an extra precaution.
In a memo to CalPERS CIO Mark Anson, Rosalind Hewsenian, managing director at consultant Wilshire Associates, noted that seven countries that do not pass muster for the fund's approved emerging-market equities list would qualify for globally issued debt: China, Colombia, Egypt, Indonesia, Morocco, Peru and Russia.
Currently, CalPERS, with $186 billion in assets, has $496 million invested in emerging-market debt, but that figure could increase substantially. The CalPERS investment committee will consider the recommendations at its June 13 meeting.