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California Political Influence versus Fiduciaries

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CA pensionManaging public pension fund money with multiple stakeholders is a complex undertaking, dealing with politicians and implementing new legislation is even more challenging. The California Public Employees’ Retirement System (CalPERS), the largest public pension fund in the United States, reported a 1% return on investments for the twelve months that ended June 30, 2012. It fell short of its benchmark that returned 1.7%. Public equities both U.S. and international took a major hit, while real estate investments helped stabilize portfolio performance. Fund assets measured around US$ 233 billion at the end of the fiscal year.

“The last twelve months were a challenging period for all investors as the ongoing European debt crisis and slowing global economic growth increased market volatility and reduced equity returns,” said Joe Dear, CalPERS Chief Investment Officer. “It’s a clear reminder that we must remain focused on performance, risk and internal controls in today’s financial environment.”

Sovereign wealth funds, public pensions, and other governmental investors tend to invest money outside of their country, state, or territory for various reasons. Some investors have an internal mandate that requires local investment, occasionally at the cost of superior financial return. In sub-Saharan Africa a majority of public investors park money into local projects, real estate, and bonds. Financial returns maybe sacrificed for social gains. This can be confusing for investment managers to prioritize and rank investments. Social returns are also hard to benchmark, it is more of an art than science.

The CalPERS Board of Administration has the sole fiduciary responsibility for the management of CalPERS assets. Depending on the circumstance, there can be tension between public pensions and the California legislature.

Politicians see a giant pot of money, sometimes forgetting that the fund has pension obligations.

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Follow the Money – Episode 45

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This longer-than-normal episode covers a wide range of issues including such as sovereign wealth funds, bitcoin, cryptocurrencies, Indian real estate, ESG, investment exclusions, central banking and more.

EPISODE 45

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The views in this media are expressed by Michael Maduell and other participants and are not reflective of the Sovereign Wealth Fund Institute (SWFI).

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CalPERS Board Elects Priya Mathur as Board President

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The board of the California Public Employees’ Retirement System (CalPERS) elected Priya Mathur as board president. The current president Rob Feckner was named vice president of the board. Feckner previously served as board president and vice president.

Priya Mathur is serving her fourth term on the CalPERS Board of Administration. Mathur is a principal financial analyst for Bay Area Rapid Transit District (BART). Mathur represents public employees on the CalPERS Board, which she joined in 2002. She currently serves on four committees: Governance, Investment, Pension & Health Benefits, and Risk & Audit. She chairs the Pension & Health Benefits Committee and is vice chair of the Governance Committee.

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Oman SGRF Contemplates $1 Billion Infrastructure Fund

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Oman’s State General Reserve Fund (SGRF) is in discussions on forming a US$ 1 billion infrastructure fund. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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