CalSTRS Adopts Fund Investment Guidelines

Now before a mutual fund can tap into CalSTRS $117 billion coffers, the fund company must have independent board members, disclose to shareholders the amounts charged for management, distribution and other fees in a dollar figure, andpublish shareholdings and transactions of portfolio and senior managers after CalSTRS voted to adopt investment standards for mutual fund holdings of the pension fund.   CalSTRS did not provide an enforcement date, according to a Sacramento Bee report.

“ Our message today is simple and clear: if you are a mutual fund that wishes to do business with [California], we expect you to adhere to the highest standards of disclosure and business practices,” state Treasurer Phil Angelidessaid in a news release issued in January when the Mutual Fund Protection principals were unveiled.   “We are committed to rooting out the bad actors and fraudulent practices that have shaken the mutual fund markets and have harmed millions of families who have placed their savings in mutual funds.

Angelides, a member of the CalSTRS Board of Directors, does not intend to stop there either, as he plans to ask the $161 billion California Public Employees’ Retirement System (CalPERS) board to adopt the same principles.  

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 Principles (See  State Treasurers Roll Out Mutual Fund Disclosure Proposal ).   The principles outlined by the trio of treasurers would apply to all mutual funds hired by the three states and their public pension funds to handle retirement plan assets.  

Leading 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.  Angelides sits on the board of CalPERS and CalSTRS – the nation’s first and third largest public pension funds, respectively – with combined assets of $278 billion.

A copy of the Mutual Fund Protection principles can be found at        http://www.treasurer.ca.gov/news/releases/2004/011504_mutualfund.pdf.