CalPERS will stop publishing its annual focus list of companies with shares it deems to be performing poorly.
The $220.1 billion California Public Employees’ Retirement System, Sacramento, said it will abandon what it called its “name-and-shame” approach and instead conduct private negotiations and proxy actions to wrest better returns from corporate laggards.
A Wilshire Consulting study found that the shares of 96 companies that CalPERS engaged with privately had outperformed 59 focus-list companies targeted from 1999 to 2008, according to the release.
“The focus list has served us well by calling public attention to some of the worst market players, but the time has come for a more effective approach,” Rob Feckner, board president, said in a statement.
The system started the list in 1987.
Separately, the system agreed to be the first pension fund to license a portfolio construction and risk management system developed by hedge fund-of-funds manager Ermitage Group.
Ermitage has managed about $130 million in a customized, European-focused hedge fund-of-funds portfolio for CalPERS since 2006.
Staff at the Sacramento-based fund used Ermitage’s OPTICS software on a trial basis in the first quarter to analyze its $51.6 billion global equity portfolio, which includes the fund’s $5.5 billion hedge fund portfolio.
CalPERS is Ermitage’s first external user of OPTICS, Ermitage CEO Ian Cadby said in a news release from the company.
OPTICS assists investors in creating customized investment portfolios that meet specific risk and return requirements, among other constraints, according to the release. The system also lets clients integrate alternative investments into the fund’s total asset allocation process.
“Our adoption of OPTICS is both a natural extension of our partnership with Ermitage and a meaningful step toward improved portfolio construction and management at CalPERS,” Clark McKinley, CalPERS spokesman, wrote in an e-mail response to questions. “We understand the need to incorporate varied economic assumptions and market scenarios into the investment process, and OPTICS is a valuable tool for meeting that need.”
Christine Williamson contributed to this story.