BILL ANALYSIS
AB 1913
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Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Alberto Torrico, Chair
AB 1913 (Davis) - As Amended: April 5, 2010
SUBJECT : Retirement: pension fund.
SUMMARY : Requires the Board of Administration (Board) of the
California Public Employees' Retirement System (CalPERS) to
adopt a policy that sets for a goal of using emerging investment
managers to manage 10% of its portfolio. Specifically, this
bill :
1)Requires CalPERS to adopt a policy, by January 1, 2012, that
sets forth a goal of utilizing emerging investment managers to
manage 10% of its total investment portfolio (approximately
$213 billion).
2)Defines "disadvantaged business enterprise" as a small
business that is majority owned by socially and economically
disadvantaged individuals.
3)Defines "emerging investment manager" as a qualified
investment manager managing an investment portfolio of between
$10 million and $1 billion and is a disadvantaged enterprise.
EXISTING LAW :
1)As provided in the state Constitution by Proposition 162, The
California Pension Protection Act of 1992, the boards of
California's public retirement systems have "plenary authority
and fiduciary responsibility for investment of monies and
administration of the system". Under Proposition 162, the
Legislature also retained it's authority to, by statute,
"continue to prohibit certain investments by a retirement
board where it is in the public interest to do so, and
provided that the prohibition satisfies the standards of
fiduciary care and loyalty required of a retirement board
pursuant to this section."
The Constitution also states, "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
AB 1913
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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."
2)Proposition 209 was enacted by voter initiative in 1996,
amending the California Constitution to insert section 31 to
Article I, reading: "The state shall not discriminate against,
or grant preferential treatment to, any individual or group on
the basis of race, sex, color, ethnicity, or national origin
in the operation of public employment, public education, or
public contracting."
FISCAL EFFECT : Unknown.
COMMENTS : According to the most recent CalPERS Diversity
Report, "To maintain a competitive edge in the investment
industry, the CalPERS Investment Office strives to take every
advantage of the skills and ideas of all industry participants.
Achieving diversity in the area of investments contributes to
the overall success of the pension fund while creating and
supporting new opportunities in underserved markets. This
investment philosophy is not limited to one asset class or
program; it is woven into every facet of the Investment Office.
"CalPERS utilizes several policies and investment programs in
its drive to promote diversification among all its investments.
This proactive approach to investing has provided opportunities
and resources for the investment industry as a whole. CalPERS
decision to focus on diverse investment opportunities is driven
by the changing global markets and the changing demographics in
the world around us."
CalPERS also recently hired an investment officer for diversity
to act as a point of contact for investment professionals
seeking to do business with them.
The Committee is informed that the author will be offering
amendments in Committee that delete the current provisions of
the bill and instead:
1)Require, by January 1, 2012, CalPERS and the California State
Teachers' Retirement System (CalSTRS) to report, as specified,
on the ethnic and gender participation in the management of
each systems entire portfolio.
AB 1913
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2)Require CalPERS and CalSTRS to report to the Legislature on
its plan for increasing participation of emerging investment
managers to 10% of its actively managed portfolio.
3)Define "emerging investment manager" as a qualified investment
manager managing an investment portfolio of between $10
million and $1 billion.
According to the sponsor, "As the nation's leader in attracting
private equity capital and advancing innovation, California
should also be the leader in encouraging equal opportunity in
our state pension fund utilization of emerging investment
managers. AB 1913 aims to support the state's economic growth
and prosperity through inclusion. The bill's prescribed method
for inclusion is to require measurement of the participation of
emerging investment managers, and have California's pension
funds set their own goals for using these kinds of firms, in a
manner consistent with meeting their fiduciary obligations."
REGISTERED SUPPORT / OPPOSITION :
Support
California State NAACP
California Teachers Association
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957