The move to keep investments in the South Pacific nation came following a recommendation from Wilshire Associates, acting as CalPERS’ consultant. At the same time, Wilshire also recommended against investments in the other three nations, according to a posting on the pension fund’s Web site.
Wilshire based its analysis on a number of different factors that includes political stability, labor practices, market liquidity and regulation. “Nothing would change under this recommendation,” CalPERS spokesman Brad Pacheco told the Wall Street Journal.
The latest move comes after a February meeting where Wilshire presented its annual list of countries whose equity markets the firm deems appropriate for investment of the $131 billion in CalPERS’ coffers. Approved at that meeting were South Korea, Poland, Israel, Czech Republic, Hungary, Taiwan, South Africa, Chile, Mexico, Jordan, Peru, Argentina, Turkey, Brazil and the Philippines (see Philippines Could Be Off CalPERS List Again ).
However, the nation’s largest public pension fund asked Wilshire to re-evaluate its analysis of the Philippines, India, Malaysia and Morocco. These markets scored high enough on Wilshire’s analysis to be deemed worthy of a second look.
It was only a year ago that the fund announced a decision to withdraw investments from the Philippines, based on Wilshire’s determination of that nation’s stock market efficacy – only to reverse that stance a few months later after a CalPERS review determined that the Philippine stock exchange could, in fact, settle stock exchange transactions within three days of the trade date (see Philippines Back on CalPERS List ). However, this timeWilshire said it has “no new information that has caused any of our sources to change their evaluation of the Philippines.”
Running the System
The process of recommendation and evaluation may still be working out some kinks. It was, after all, only a year ago that the pension fund’s board adopted the permissible country review process that takes into account broad financial factors as well as transparency, political stability and labor practices/standards (see New Emerging Market Standard Emerges at CalPERS ).
Now theCalPERS board will vote at an April 14 meeting on whether or not to adopt a new method for moving countries on and off the list. Specifically, they are considering creating a so-called cure period for countries in danger of being dropped from the list. CalPERS investment managers would be notified if a country entered into the cure period but would still be permitted to invest in the cure country.