CalPERS' investment committee is scheduled to decide whether to amend the contracts of its investment consultants so they expire on the same date, June 30, 2021, in a move to reduce the number of RFPs the pension fund would need to issue and, possibly, hire fewer consultants, material prepared for the investment committee's Aug. 13 meeting shows.
If approved, the $359.3 billion California Public Employees' Retirement System, Sacramento, would extend by one year the contracts of its general investment, forestry, private equity and infrastructure consultants, and reduce its real estate consultant's contract, which is now scheduled to end on March 31, 2022. The fund's general investment and forestry consultant is Wilshire Associate; its private equity and infrastructure consultant is Meketa Investment Group; and its real estate consultant is Pension Consulting Alliance.
"Merging multiple solicitations into one or two reduces complexity and cost," a staff report prepared for the meeting states. "Board investment consultant contract expenses … account for greater than 40% of the total fiscal year investment consultant expenditures."
Aligning the investment consultants' contracts would give the board time to "analyze the existing investment consultant structure" and the costs of having multiple investment consultants, the staff memo states.
Should the committee decide to stay with the status quo, staff expect to ask the investment committee to approve four separate investment consultant RFPs at its November meeting.
Separately, CalPERS staff is deferring until 2020 a review of the status of state-mandated divestment of investments in companies with specified business activities in Iran and Sudan. CalPERS was scheduled to review its Iran and Sudan divestment programs in September. However, recent events — including President Donald Trump's withdrawing the U.S. from the 2015 agreement with China, France, Germany, Russia, the United Kingdom and the European Union regarding Iran's nuclear program and suspension of economic sanctions against the country — make it "premature" to undertake the scheduled five-year review, a separate staff memo said.
Pension officials also will receive their first review of an opportunistic strategies program the fund launched in 2017 to bring additional "value-add" to the portfolio by investing across asset classes and capital structures. The program currently has three parts: execution services and strategy, which includes CalPERS trading operations and securities lending; opportunistic investments, which invests in shorter-term investment opportunities; and enhanced beta. So far, the team has expanded securities lending to use non-cash collateral to increase alpha opportunities.
In other expected action, CalPERS' performance, compensation and talent management committee, at its Aug. 14 meeting, is scheduled to consider whether to change the CEO's incentive plan to one based only on qualitative factors from the current plan in which only 25% is based on qualitative factors. The current plan includes the pension fund performance, among other factors,
Also scheduled for Aug. 14, the governance committee will consider whether to approve a draft of a policy for handling harassment allegations against board members. The draft policy provides for three stages in the event of an allegation: a preliminary investigation; a formal investigation; and, when warranted, board action, a staff report to the committee states.