CalPERS board will discuss at its March 17 meeting whether to join the national effort by municipal bond issuers to persuade the three leading ratings agencies to change their methods of rating municipal bonds. State Treasurer Bill Lockyer was among 15 state treasurers and investors who sent a letter to Fitch Ratings, Moodys Investors Service and Standard & Poors urging them to create new ratings standards for municipalities, which are held to higher standards than corporate issuers, according to the March 4 letter. This differential treatment undermines the functioning of an efficient and transparent capital market, reads the letter.
At the meeting, the board also will decide whether the $240.6 billion California Public Employees Retirement System, Sacramento, will develop separate new in-house passive international equity portfolios for small/microcaps and emerging markets. Staff members already manage a total of $83 billion in eight domestic equity portfolios and five international equity portfolios, according to the funds website. Funding amounts and sources for the new portfolios have not been discussed. Managing the portfolios in-house would save $2.5 million to $4 million in fees for every $1 billion invested, according to a staff memo to the board.
Separately, CalPERS quarterly returns show the portfolio lost 0.5% in the fourth quarter, lagging its custom benchmark index by 70 basis points. The portfolio returned 10% for the year and an annualized 11.9% for the three years ended Dec. 31. The strongest performer was the new inflation-linked asset class, which returned 4.1% for the quarter. Fixed income was next with 3.5%, according to data compiled by Wilshire, CalPERS general consultant. Global equity was down 2.4%, the weakest performing asset class.