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Pension Funds

CalPERS opposes bill that would require divestment from Turkish investments

CalPERS is opposing a state bill that would require the $362 billion pension plan and CalSTRS to stop making new investments and to liquidate existing Turkish investments should the federal government enact a law sanctioning Turkey for failure to acknowledge the Armenian genocide.

The bill would pertain both to the Sacramento-based California Public Employees' Retirement System and the $227.8 billion California State Teachers' Retirement System, West Sacramento, and would not take effect unless the federal government enacts legislation sanctioning Turkey. If the federal government does act, CalPERS and CalSTRS would have 18 months to liquidate their Turkish investments. The bill would sunset on Jan. 1, 2025, or sooner, should the Turkish government acknowledge its responsibility for the Armenian genocide.

"While we respect the underlying and spirit and purpose of (the) bill … staff is trying to take the social and political issues out of the equation but rather focus on our investment policies that prefer constructive engagement as a way to change behavior," Danny Brown, chief of CalPERS' legislative affairs division, told the investment committee at its meeting on Monday. "We want to ensure that our investment office has a full set of investment opportunities to hit their 7% target." Based on its preliminary analysis, CalPERS' staff estimates the pension plan's exposure to Turkish investment vehicles ranging between $77 million to $350 million as of Dec. 31.

Separately, CalPERS' investment committee heard a report concerning co-investments. Sarah Corr, interim managing investment director for private equity, said the pension fund is not currently making co-investments, in response to a question from board member Margaret Brown. The rest of the discussion on the details of CalPERS' co-investment program was reserved for closed session. Those closed session topics include the history of co-investments at CalPERS, why the plan is not currently making co-investments, whether CalPERS' own co-investment data shows any evidence of adverse selection, and how staff plans to mitigate the risk of portfolio concentration in future co-investments.

This prompted retired California prosecutor David Soares during the public comment period to remind the committee about California's open meetings law.

"I'm very concerned about the way that closed session is being used, Mr. Soares said.

He added that he wanted to remind the board members, as individuals, that under the California open meetings, there is a preference for open government in California.

Mr. Soares repeated a suggestion of board member and California Controller Betty Yee that the pension fund hire an independent outside counsel that does not report to CalPERS' CEO to advise the board.

"The other thing that I want to encourage this board, I don't know what you are discussing in closed session, but if you believe that closed session is being violated under the government code, you have the ability to talk to the state auditor," Mr. Soares said.

"Under the Bagley-Keene Act, (California's open meetings law) the CalPERS investment committee has the authority to discuss investment strategy in closed session," spokeswoman Megan White said in an email. "To fully understand the strategy, committee members must be provided with the complete context of all information under discussion, including relevant details on proprietary data and past decisions."

The investment committee also has the authority to approve publicly releasing information heard in closed session, Ms. White added.