CalPERS Ponders Fund Investor Principles

March 11, 2004 ( - The nation's largest public pension fund is apparently set to link arms with a handful of its sister public funds in adopting a laundry list of investor protection principles to guard against mutual fund fraud.

The $161-billion California Public Employees’ Retirement System (CalPERS) is scheduled to vote next week on adopting investor protection principles unveiled in January by investment officials in several states and approved last week by theCalifornia State Teachers’ Retirement System (CalSTRS), Dow Jones reported.

The effort is focused on reforming mutual fund fees, board structure, disclosure to investors, and practices including the use of soft dollars. It would apply to mutual funds hired by states and public pension funds to handle a wide variety of pension programs, including 401(k) plans.

CalPERS’s consideration of the principles comes in response to a request by California State Treasurer Phil Angelides, a member of the CalPERS andCalSTRSboards and one of the officials who put the guidelines forward earlier this year.

Other State Action

Angelides, New York Comptroller Alan Hevesi, and North Carolina Treasurer Richard Moore initially outlined the reforms in January under the banner of Mutual Fund Protection PrinciplesLeading the charge is not an unusual position for Angelides, who has long sought to prod the California’s public pension funds into adopting reform policies (See  A Call to Action ). In March 2003, for example, he unveiled a plan to combine the resources of the two funds to create an office charged with pushing aggressive corporate and market reforms to deal with scandals that have socked investors with huge losses (See  Angelides Posits Purse Power ).

The three state treasurers carry a significant amount of financial clout.  Moore is the sole trustee of the North Carolina Public Employees Retirement System, with assets of more than $60 billion, and is responsible for the nation’s largest public 401(k) plan with $2.3 billion in assets. Hevesi is the sole trustee of the New York State Common Retirement Fund, the nation’s second largest public pension fund with assets of $106 billion. 

A copy of the Mutual Fund Protection principles can be found at .

In a related matter, CalPERS board also will consider at the March 15 meeting whether to approve a new ethics code for money management firms it hires, according to news reports. The pension fund said in January that it was developing the conduct code based partly on responses to its own poll about how the ongoing mutual fund industry probe was affecting the firms.