CalPERS CIO Russell Read said Monday he plans to move some of the systems $7.2 billion external enhanced equity indexing strategy in-house, since the $5.1 billion portfolio currently managed internally has outperformed external managers. Mr. Read told of his plans at Mondays investment committee meeting of the $240.6 billion California Public Employees Retirement System, Sacramento. In the three years ended Dec 31, the internal portfolio outperformed the PERS Wilshire 2500 index by 1.4 percentage points; the external portfolio underperformed its custom index by 1.1 percentage points in the same time period. Mr. Read said he will put more money into the internal portfolio than the one managed by outside managers, but he will not eliminate the external portfolio. The current external managers are Atlantic Asset Management, which runs $400 million; Barclays Global Investors, $1.2 billion; Franklin Portfolio Associates, $1.1 billion; Golden Capital, $800 million; Goldman Sachs, $400 million; INTECH, $1.3 billion; Smith Breeden, $600 million; T. Rowe Price, $700 million and WAMCO, $600 million. Details about the transition were not available by press time.
The committee also deferred a vote to oppose a state bill that would prevent it from investing in private equity firms that are at least partially owned by sovereign wealth funds whose countries violate human rights. Rob Feckner, president of the board of administration, said Assemblyman Alberto Torrico has indicated he is willing to compromise on the bill, so the committee will wait until its April 21 meeting.
Separately, the board approved the creation of two new internal passive international equity portfolios for small/microcaps and emerging markets. The board did not publicly disclose sizes or funding for the new portfolios, said spokesman Clark McKinley.
The system also will join with 15 major bond issuers to encourage the major ratings agencies to change the way they rate municipal bonds. State Treasurer Bill Lockyer, who sits on the CalPERS investment committee, was one of the state treasurers and investors who sent a letter March 4 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. Having ratings that reflect a fair and equal standard is unambiguously a positive, Mr. Read said.