BILL ANALYSIS Ó
SB 294
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Date of Hearing: July 6, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 294 (Price) - As Amended: May 9, 2011
Policy Committee: PERSS Vote:4-1
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the California Public Employees' Retirement
System (CalPERS) and State Teachers Retirement System (CalSTRS)
to provide a five-year strategic plan for emerging investment
manager participation and to report to the Legislature annually
on the progress of the plan. Specifically, this bill:
1)Requires the CalPERS and CalSTRS boards to each provide a
five-year strategic plan, beginning August 1, 2012, for
emerging investment manager participation across all asset
classes.
2)Requires the CalPERS and CalSTRS boards to submit an annual
report to the Legislature, beginning March 1, 2014, and
annually thereafter, regarding the progress of the strategic
plan.
3)Provides that nothing in this bill requires the boards to take
action that is not consistent with the fiduciary
responsibilities of the board as described in Section 17 of
Article XVI of the California Constitution.
4)Specifies the provisions of this bill remain in effect until
January 1, 2018, unless a later statute is enacted to delete
or extend that date.
FISCAL EFFECT
The requirements of this bill are largely consistent with
efforts already underway at CalPERS and CalSTRS. As a result,
according to CalSTRS, the administrative costs associated with
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this bill are minor and absorbable. CalPERS estimates annual
administrative costs of $100,000.
COMMENTS
1) Purpose . According to the author, while both CalPERS and
CalSTRS have voluntarily adopted emerging manager programs as
a strategy to increase diversification, there is no existing
law that governs these programs. The author states this bill
is intended to encourage expanded opportunities for newer and
smaller investment companies in the state procurement of
financial services, including the management of assets managed
by the state's public pension funds.
2)Background . California's two largest pension funds - CalPERS
and CalSTRS - have combined assets about $350 billion. About
one-half of these assets are managed internally by investment
staff and the other half are placed with outside managers.
The two funds have been pursuing strategies to increase the
diversity of their investing managers recognizing the economic
value from a variety of investment approaches and methods.
According to information provided to the committee by CalPERS
and CalSTRS, both entities actively encourage participation by
minority-owned, women-owned and emerging investment management
firms, and use the services of specialist consultants in
diversity investments to further their outreach. As an
example, CalPERS engages in research briefings, hosts outreach
events and participates in emerging manager and diversity
conferences nationwide. The CalPERS Investment Officer for
Diversity provides another point of contact for emerging
managers, as does a web-based submission process that allows
money managers to present investment proposals directly to
Investment Office staff.
3)Relevant legislation . AB 17 (Davis) requires the CalPERS
Board of Administration to annually report to the Legislature
on the ethnicity and gender of its external investment
managers and external firms that provide brokerage services.
It would also require the Board to develop and include in the
report plans and strategies to increase the participation of
emerging investment managers and emerging brokerage firms.
4)Previous legislation . AB 1913 (Davis) and AB 1919 (Davis)
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both from last year, contained similar provisions to AB 17.
Both bills were held in the Senate Rules Committee.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081