CalPERS Discusses Adoption Of “Investment Beliefs”

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The last agenda item for Monday’s meeting of the Investment Committee of the Public Employees’ Retirement System was an ongoing ”Discussion of Investment Beliefs”. No, this wasn’t a theological discussion. For the last two years, the CalPERS investment office has been involved in discussions about developing a set of “investment beliefs”. Last fall, CalPERS even retained a consultant to assist in the project.

Part of this project has involved interviewing CalPERS’ Board Members, investment staff and others. Some of the results of this process are interesting. For example,

  • There is a “low conviction” that hedge funds should be an important part of CalPERS strategy; and
  • There is a “very strong conviction” that real estate, especially core real estate, should be an important part of CalPERS’ investment strategy.

Not surprisingly, the CalPERS staff believes that corporate governance adds value and that CalPERS should engage companies on governance issues. There is considerable, but less support for investment decisions based on environmental or social factors, in particular a company’s human capital practices including fair labor practices, health and safety, responsible contracting and diversity.

Whatever the outcome of this effort, it is useful to remember that CalPERS’ raison d’être and its sole and exclusive purposes are already spelled out in the California Constitution:

“The members of the retirement board of a public pension or retirement system shall discharge their duties with respect to the system solely in the interest of, and for the exclusive purposes of providing benefits to, participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable expenses of administering the system.”

Article XVI, Section 17(b).