CalPERS staff plans to renew the contracts of 23 international equity and fixed-income managers, which run a combined $19 billion, for one year, pending approval of the $232.1 billion systems investment committee.
We support the annual contract renewal recommendation as the current stable of (international equity) managers has outperformed since inception, and only slightly underperformed in the two most recent fiscal years, Michael Schlachter, managing director at general investment consultant at Wilshire Associates, wrote in a memo to Anne Stausboll, CalPERS interim CIO. The investment committee should be pleased with a program that outperformed overall for the year and renew all five managers contracts for another year, he wrote about the fixed-income portfolio.
The California Public Employees Retirement Systems 18 international equity managers run a total of $14.3 billion; five international fixed-income managers handle a combined $4.72 billion. Genesis Investment Management, the manager with the largest international equity portfolio, runs a $1.4 billion emerging markets strategy. The largest fixed-income manager is Alliance Bernstein, which runs $1.3 billion in international fixed income.
CalPERS reported returns of -2.6% for the year ended June 30, just a hair worse than the -2.4% loss staff predicted in July. The $117.7 billion global equities portfolio was the worst-performing asset class, with a total return of -11.4% vs. -10.2% for the custom benchmark, according to a Wilshire report. The $25.4 billion private equity portfolio posted the strongest yearlong returns at 19.6%.
The investment committee will consider the proposal Sept. 15.
Separately, CalPERS announced it agreed to settle a class-action lawsuit against two former UnitedHealth Group executives, confirmed spokesman Clark McKinley.
William McGuire, former CEO and chairman of UnitedHealth, agreed to pay $30 million to company shareholders, but did not admit guilt, according to a news release sent by Mr. McGuire. He also agreed to pay back 3.675 million shares of stock options. David Lubben, the former general counsel, will pay $500,000. Bob Chlopak, Mr. McGuires spokesman, declined to comment beyond the release; Mr. Lubben could not be reached for comment.
The settlement requires approval by the U.S. District Court in Minneapolis.