BILL ANALYSIS �
AB 17
Page 1
ASSEMBLY THIRD READING
AB 17 (Davis)
As Amended January 13, 2012
Majority vote
PUBLIC EMPLOYEES 4-2 APPROPRIATIONS 12-5
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|Ayes:|Furutani, Allen, Ma, |Ayes:|Fuentes, Blumenfield, |
| |Wieckowski | |Bradford, Charles |
| | | |Calderon, Campos, |
| | | |Chesbro, Gatto, Hall, |
| | | |Hill, Ammiano, Mitchell, |
| | | |Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Mansoor, Harkey |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Requires the California State Teachers' Retirement
System (CalSTRS) to report annually to the Legislature on the
ethnicity and gender of investment managers and brokerage firms
who participate in managing its portfolio. Specifically, this
bill :
1)Requires CalSTRS to define the terms "emerging investment
manager" and "emerging brokerage firm" by regulation.
2)Requires CalSTRS to report to the Legislature annually on or
before August 1, 2013, on the ethnicity and gender, as
specified, of investment managers who participated in managing
the CalSTRS external fund management contracts and brokerage
firms which provided brokerage services to the fund's
internally and externally managed portfolio in the immediate
preceding fiscal year.
3)Requires CalSTRS to develop and report to the Legislature a
plan and strategy for participation of emerging investment
managers and brokerage firms, as specified.
4)Sunsets these provisions on January 1, 2018.
EXISTING LAW : Provides, under the state Constitution by
AB 17
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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 its 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."
FISCAL EFFECT : According to the Assembly Appropriations
Committee, annual costs to collect data and prepare reports of
about $70,000 for CalSTRS.
COMMENTS : According to the author, "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 17 aims to support the state's economic
growth and prosperity through increasing the participation of
emerging managers and emerging brokerage firms in CalSTRS."
Supporters of the bill state, "Women and minority-owned
businesses are not reflected among pension fund managers to the
same extent as they are represented in the U.S. population - 51%
female, 25% non-white. Currently, participation by these groups
in California pension fund asset management continues to be
disproportionately low based on limited available state-level
data."
According to CalSTRS, "Pension funds around the country have
recently begun pursuing strategies to increase the diversity of
their investing managers, recognizing these emerging managers as
a source of untapped economic value. In this vein, the CalSTRS
board and staff have been pursuing strategies to expand the
AB 17
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diversity of investment management, both internally and
externally. In 2003, the board adopted Strength as one of
CalSTRS Core Values, elaborated as ensuring the strength of
CalSTRS by embracing a diversity of ideas and people, and set
forth an objective to increase the diversity of investment
managers, by focusing efforts on emerging managers. CalSTRS
defines an emerging manager in terms of the size and longevity
of the fund managers, without regard to gender or ethnicity. As
a direct result of this effort, women and minorities now manage
more than $3 billion of assets for CalSTRS. CalSTRS has
received national recognition, including several awards, for its
efforts and actions to expand diversity within its investment
portfolio and is seen as an industry leader and best practice
model.
"This dedication to diversity has brought about the development
of a business plan to formalize the commitment to diversity
within CalSTRS investment portfolio, and to make a statement to
the industry that this is a long-term effort. The business plan
is designed to provide the Investment Committee, investment
staff, and external consultants a plan of action for the next
five years. The purpose of this business plan is to formalize
the programs CalSTRS currently has in place, to set new goals,
and establish a long-term plan. Diversity will be further
interwoven across CalSTRS' entire investment portfolio and
program-thus, making it a truly comprehensive plan."
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 : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0003048