BILL ANALYSIS �
AB 17
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Date of Hearing: April 13, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 17 (Davis) - As Introduced: December 6, 2010
Policy Committee: PERS Vote:4-2
Urgency: No State Mandated Local Program:
No Reimbursable:
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 investment firms and managers who
participate in managing its portfolio. Specifically, this bill:
1)Requires CalPERS and CalSTRS to report annually to the
Legislature on both the ethnicity and gender of investment
managers, as specified, who are employed by entities that
participate in managing the system's investment portfolios and
the ownership breakdown of investment and brokerage firms with
which the systems' contract.
2)Requires the report to include a detailed and verifiable plan
and strategy to increase participation of emerging investment
managers and emerging brokerage firms in each asset class,
emerging meaning firms which are majority-owned by women or
minority ethnic groups managing portfolios below a specified
size, depending on asset class.
FISCAL EFFECT
Annual costs to collect data and prepare reports of about
$50,000 for CalSTRS and $150,000 for CalPERS.
COMMENTS
1)Rationale. Supporters of the bill contend, Women and
minority-owned businesses are under represented among pension
fund managers to the same extent as they are represented in
AB 17
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the U.S. population - 51 % female, 25 % non-white.
Participation by these groups in California pension fund asset
management continues to be disproportionately low, based on
available state-level data.
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.
Pensions funds have recently 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, they both 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)Possible amendments.
a) Given the demographics of California, there is not a
majority ethnic group, although that is likely to change
soon with Latinos becoming the majority. The author may
want to specify a definition of minority or reference a
definition contained elsewhere in law.
b) The bill asks for ownership information for investment
firms. Some of these firms are publicly owned and it would
not be possible to identify the composition of the owners,
which literally changes by the minute. The author may want
to limit the requirement to privately owned firms.
1)Previous legislation . This bill is similar to AB 1913 (Davis)
and AB 1919 (Davis) both from last year. Both bills were held
in the Senate Rules Committee.
AB 17
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Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081