Angelides Defends CalPERS Standards

Bernard Wasow’s May 6 commentary about state pension fund investments in developing foreign nations missed the mark. I successfully pushed for adoption of tough new standards for investments in foreign emerging markets by the California Public Employees’ Retirement System to protect pension and taxpayer funds. I did so because I was troubled by the investment results in these markets. For example, five-year annualized returns, ending Dec. 31, 2001, were -31% in Indonesia, -18% in Malaysia, -29% in the Philippines.

Our new policies make good common sense. First, before CalPERS invests in a country, it must be clear that the country is developing the political stability, democratic institutions and free markets critical to long-term economic growth. Countries that exhibit progress in these areas offer the best hope for sustained, positive returns. Second, rather than merely passively investing, CalPERS now employs active managers who have a strong knowledge of these markets to protect our funds. Our new policies are designed to steer investments away from companies engaged in detrimental practices -- such as abusive child labor -- at odds with our core values.

Since the standards took effect in July 2002, CalPERS’ returns from these markets have outperformed the broader index of emerging-market investments by nearly 4 percentage points.

Phil Angelides

State Treasurer

Sacramento