BILL ANALYSIS �
AB 17
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Date of Hearing: May 18, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 17 (Davis) - As Amended: May 11, 2011
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)Mandates the report include the commission paid for trading b
product to each brokerage firm utilized by the fund.
FISCAL EFFECT
Annual costs to collect data and prepare reports of about
$50,000 for CalSTRS and between $500,000 and $750,000 for
CalPERS.
COMMENTS
1)Rationale. Supporters of the bill contend women and
minority-owned businesses are under- represented among pension
fund managers relative to the at-large population.
Participation by these groups in California pension fund asset
management continues to be disproportionately low, based on
available state-level data.
AB 17
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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)CalPERS opposition . CalPERS states that this bill will result
in substantial costs to collect and analyze data on the
ethnicity and gender of every "investment officer," an
undefined term, employed by every external investment
management firm that participates in externally managing
CalPERS assets, whether a private or public investment firm,
or whether based domestically or internationally. Compared to
other reports of this size, including staff time to review,
edit and approve the different components of the report, and
the magnitude of required diversity surveying encompassing
over 700 investment management firms contracted by CalPERS,
the estimated cost could be in the range of $500,000 to
$750,000.
4)Suggested amendment.
The bill requires CalPERS and CalSTRS to, "? report and
testify at hearings before the Legislature." The Legislature
already has the right and authority to compel PERS to testify.
Placing a requirement to testify in statute sets a precedent
that suggests that a statute may be necessary to require
AB 17
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testimony.
5)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.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081