BILL ANALYSIS
AB 1913
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ASSEMBLY THIRD READING
AB 1913 (Davis)
As Amended April 22, 2010
Majority vote
PUBLIC EMPLOYEES 4-2 APPROPRIATIONS 11-5
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|Ayes:|Torrico, Furutani, |Ayes:|Fuentes, Ammiano, |
| |Hernandez, Ma | |Bradford, Coto, Davis, |
| | | |Hill, Hall, Skinner, |
| | | |Solorio, Torlakson, |
| | | |Torrico |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey, Nestande |Nays:|Conway, Harkey, Miller, |
| | | |Nielsen, Norby |
| | | | |
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SUMMARY : Requires the California State Teachers' Retirement
System (CalSTRS) and California Public Employees' Retirement
System (CalPERS) boards to report annually to the Legislature on
the ethnicity and gender of emerging investment managers
participating in the funds' management contracts. Specifically,
this bill :
1)Requires the boards to prepare the reports annually on or
before January 1, 2012, through January 1, 2016.
2)Requires the report to: a) identify the investment firm,
ownership composition, the portfolio value, investment
classes, and ethnic and gender breakdowns the firm's owners
and officers; and, b) include strategies to increase the
participation of emerging investment managers until they
manage at least 10% of the board's actively managed portfolio.
3)Defines "emerging investment manager" to mean a qualified
investment adviser who is a woman or a member of a minority
group and who managers an investment portfolio of between $10
million and $1 billion of the board's actively managed
portfolio.
EXISTING LAW :
AB 1913
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1)Provides, under the state Constitution by Proposition 162, the
California Pension Protection Act of 1992, that 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
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)Provides, under Proposition 209, which was enacted by voter
initiative in 1996, for 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 : According to the Assembly Appropriations
Committee, annual costs to collect data and prepare reports of
about $15,000 for CalSTRS and $20,000 for CalPERS.
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.
AB 1913
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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.
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."
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0004354