CalPERS' so-called focus list program continues to demonstrate “strong evidence of excess returns” for companies targeted by the pension fund to improve corporate governance practices, according to a review by investment consultant Wilshire Associates.
The review, which is part of the agenda material for the $269.1 billion California Public Employees' Retirement System's investment committee meeting on Oct. 14, shows that for a five-year period after underperforming global companies were engaged to improve governance practices, the companies' stocks delivered excess cumulative returns of 13.72 percentage points above the Russell 1000 index and 12.11 percentage points above their respective Russell 1000 sector indices.
The review covered the period from 1999 through June 30, 2013.
The effect of Sacramento-based CalPERS' intervention has been nicknamed the “CalPERS Effort,” for the positive influence the pension fund's intervention has had on stock prices.
The review also found that companies on the 2012 focus list, from Aug. 31, 2012, through June 30, 2013, posted strong returns.
Wilshire reported the focus-list stocks generated excess returns of 7.2 percentage points, relative to the Russell 1000 index, and 10.42 percentage points relative to the Wilshire 5000 sector groups during the period.
Under California law, there are 40 companies on the focus list. CalPERS stopped publicly naming the companies in 2010, instead choosing to engage them confidentially.