BILL NUMBER: AB 17	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JANUARY 13, 2012
	AMENDED IN ASSEMBLY  MAY 11, 2011

INTRODUCED BY   Assembly Member Davis

                        DECEMBER 6, 2010

   An act to add and repeal Section 22204.5 of the Education Code,
  and to add and repeal Section 20139 of the Government Code,
  relating to retirement.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 17, as amended, Davis. Retirement: pension fund management.

   The Public Employees' Retirement Law creates the Public Employees'
Retirement Fund, which is a trust fund created and administered
solely for the benefit of the members and retired members of this
system and their survivors and beneficiaries. The Board of
Administration of the Public Employees' Retirement System has the
exclusive control of the administration and investment of the
retirement fund. 
   The Teachers' Retirement Law establishes the State Teachers'
Retirement System in order to provide a financially sound plan for
the retirement, with adequate retirement allowances, for teachers in
public schools of the state, teachers in schools supported by the
state, and other persons employed in connection with the schools. The
plan and the system are administered by the Teachers' Retirement
Board.
   This bill would require the  Board of Administration of
the Public Employees' Retirement System and the  Teachers'
Retirement Board to submit a report to the Legislature, on or before
August 1,  2012   2013  , and annually each
August 1 thereafter, on the ethnicity and gender of the investment
managers with whom  they have   it has 
contracted in the immediately preceding fiscal year, and who
participate in managing  their   its 
portfolios of external fund management contracts, as specified. The
bill would also require  these boards   the
board  to report to the Legislature, on or before August 1,
 2012   2013  , and annually each August 1
thereafter, on the ethnicity and gender of the brokerage firms with
which  they have   it has  contracted in
the immediately preceding fiscal year, and that provide brokerage
services to  their   the  fund's internally
and externally managed investment management firms, as specified.
The bill would also require  these boards   the
board  to develop and report to the Legislature, on or before
August 1,  2012   2013  , and annually each
August 1 thereafter, a plan and strategy for participation of
emerging investment managers and emerging brokerage firms. The bill
would provide for the repeal of these provisions on January 1, 2018.
The bill would also make related findings and declarations.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) The  California Public Employees' Retirement System,
the nation's largest pension fund, and the  California State
Teachers' Retirement System  , together, have  
has  approximately  $328   $130 
billion in assets under  their   its 
management.
   (b) 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 and emerging brokerage firms.
  SEC. 2.  Section 22204.5 is added to the Education Code, to read:
   22204.5.  (a) (1) Notwithstanding Section 10231.5 of the
Government Code, on or before August 1,  2012  
2013  , and annually each August 1 thereafter, the board shall
report to the Legislature, comprehensively and aggregately, on the
ethnicity and gender of the investment managers with whom it has
contracted in the immediately preceding fiscal year, and who
participate in managing its portfolio of external fund management
contracts, including all asset classes in which the fund has assets
allocated. The report shall identify the ownership composition of any
privately owned investment firm, including ethnic and gender
breakdowns as well as the portfolio value amount and asset class
managed, in addition to fees paid to each investment manager. The
report shall separately include a percentage breakdown by ethnicity
and gender of investment officer composition of contracted portfolio
management firms. The board shall report and testify before the
Legislature regarding strategic plans of promoting existing
underlying emerging managers from manager of manager structures to
direct mandates.
   (2) Notwithstanding Section 10231.5 of the Government Code, on or
before August 1,  2012   2013  , and
annually each August 1 thereafter, the board shall also report,
comprehensively and aggregately, on the ethnicity and gender of the
brokerage firms with which it has contracted in the immediately
preceding fiscal year, and which provide brokerage services to the
fund's internally and externally managed investment management firms
in addition to the commissions paid for trading equity securities and
par value traded for fixed income by product to each brokerage firm
utilized by the fund. Annually, the board shall testify at hearings
before the Legislature to discuss the reports required to be
submitted by this section.
   (b) Notwithstanding Section 10231.5 of the Government Code, on or
before August 1,  2012   2013  , and
annually each August 1 thereafter, the board shall develop and report
to the Legislature a plan and strategy for participation of emerging
investment managers who manage internally and externally managed
assets in each asset class, and emerging brokerage firms that execute
securities on organized exchanges as selected agents. Any
percentages provided by the board shall be used as a reporting
threshold only, and not as a basis upon which to contract with any
given emerging investment manager or emerging brokerage firm.
   (c) The board shall define the terms "emerging investment manager"
and "emerging brokerage firm" by regulation for purposes of this
section.
   (d) Nothing in this section shall require the board to take action
as described in this section unless the board determines, in good
faith, that the action described in this section is consistent with
the fiduciary responsibilities of the board as described in Section
17 of Article XVI of the California Constitution.
   (e) The reports required to be submitted by this section shall be
submitted in compliance with Section 9795 of the Government Code.
   (f) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date. 
  SEC. 3.    Section 20139 is added to the
Government Code, to read:
   20139.  (a) (1) Notwithstanding Section 10231.5, on or before
August 1, 2012, and annually each August 1 thereafter, the board
shall report to the Legislature, comprehensively and aggregately, on
the ethnicity and gender of the investment managers with whom it has
contracted in the immediately preceding fiscal year, and who
participate in managing its portfolio of external fund management
contracts, including all asset classes in which the fund has assets
allocated. The report shall identify the ownership composition of any
privately owned investment firm, including ethnic and gender
breakdowns as well as the portfolio value amount and asset class
managed, in addition to fees paid to each investment manager. The
report shall separately include a percentage breakdown by ethnicity
and gender of investment officer composition of contracted portfolio
management firms. The board shall report and testify before the
Legislature regarding strategic plans of promoting existing
underlying emerging managers from manager of manager structures to
direct mandates.
   (2) Notwithstanding Section 10231.5, on or before August 1, 2012,
and annually each August 1 thereafter, the board shall also report,
comprehensively and aggregately, on the ethnicity and gender of the
brokerage firms with which it has contracted in the immediately
preceding fiscal year, and which provide brokerage services to the
fund's internally and externally managed investment management firms
in addition to the commissions paid for trading equity securities and
par value traded for fixed income by product to each brokerage firm
utilized by the fund. Annually, the board shall testify at hearings
before the Legislature to discuss the reports required to be
submitted by this section.
   (b) Notwithstanding Section 10231.5, on or before August 1, 2012,
and annually each August 1 thereafter, the board shall develop and
report to the Legislature a plan and strategy for participation of
emerging investment managers who manage internally and externally
managed assets in each asset class, and emerging brokerage firms that
execute securities on organized exchanges as selected agents. Any
percentages provided by the board shall be used as a reporting
threshold only, and not as a basis upon which to contract with any
given emerging investment manager or emerging brokerage firm.
   (c) The board shall define the terms "emerging investment manager"
and "emerging brokerage firm" by regulation for purposes of this
section.
   (d) Nothing in this section shall require the board to take action
as described in this section unless the board determines, in good
faith, that the action described in this section is consistent with
the fiduciary responsibilities of the board as described in Section
17 of Article XVI of the California Constitution.
   (e) The reports required to be submitted by this section shall be
submitted in compliance with Section 9795.
   (f) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.