The Associated Press reports that Assembly Bill 1913 seeks to increase the pension funds’ business with what it terms “emerging investment managers” – defined as qualified investment advisers who are women or members of a minority group, and who would manage a portfolio of between $10 million and $1 billion. The bill states that businesses owned by women and minorities are not adequately represented in the state’s pension fund portfolios, compared to their proportion of California’s population, according to the news report.
Supporters of the measure want to see 10% of the funds’ portfolios managed by emerging investment managers.
Republican lawmakers opposed the legislation, saying the state constitution prevents such quotas, citing Proposition 209, an initiative passed by voters in 1996, which prevents the state from granting preferential treatment to individuals or groups based on gender or ethnicity, among other characteristics, when granting public contracts. Democrats countered that the bill would encourage diversity in investments, which could help the funds.
The California Public Employees Retirement System’s (CalPERS) new investment diversity officer, hired in March, said they are working to amend the bill because its definition of emerging managers isn’t consistent with CalPERS’ definition. The California State Teachers’ Retirement System (CalSTRS) defines an emerging manager or firm as one managing less than $2 billion in assets.