California State Controller Steve Westly proposed that CalPERS relax its rules on investing in non-permissible emerging market stocks.
Mr. Westly proposed allowing CalPERS' active external emerging market equity managers - AllianceBernstein, Dimensional Fund Advisors and Genesis Asset Managers - to invest in public companies in non-permissible markets if the companies adhere to the Global Sullivan Principles, International Labor Organization standards and the United Nations principles for responsible investment. Currently, the $217.5 billion California Public Employees' Retirement System, Sacramento, invests in emerging markets based on a combination of market factors and country factors involving political stability, human rights and labor practices.
"The world's fastest growing economies - China, Russia, Brazil and India among them - offer incredible investment opportunities," Mr. Westly wrote in an Aug. 30 letter to board members that was included as part of the CalPERS' board agenda. "I propose that CalPERS consider expanding our current investment policies to allow us to capitalize on opportunities in these foreign emerging markets."
China and Russia are among eight countries that fall short of the pension fund's standards, while Brazil and India are eligible for CalPERS' investments.
In a memo to the board, CalPERS staff suggested that managers also justify specific stock investments, that geopolitical and investibility factors be addressed, and that such companies comply with UN principles. The number of stocks affected "is unknown and would likely vary over time," the memo said.
The board will discuss the proposal at its Oct. 16 meeting.