The California Public Employees’ Retirement System will launch a new fund targeted at emerging managers, says Senior Investment Officer Leon Shahinian. He discussed the fund at a joint conference on diversity hosted by CalPERS and the California State Teachers’ Retirement System in San Jose, Calif., last week.
The fund’s size has yet to be set as CalPERS, the nation’s largest pension fund, is still assessing proposals for the fund’s specifics. But the fund might take a form similar to CalPERS’ California Initiative Program, a $475 million fund launched in 2001 to promote economic expansion in underserved urban and rural markets. That program has partnered with such firms as DFJ Frontier, Garage Technology Ventures and American River Ventures.
The term “emerging manager” refers to first and second-time fund managers with under $500 million in their funds, but Shahinian used the term to describe minority fund managers. Demographic trends may help justify backing such managers. “About 85% of population growth will come from minorities,” Shahinian says.
CalPERS and CalSTRS executives say advancing a social agenda will not compromise their fiduciary duty to pursue the highest possible return for California pensioners. Other executives said a move to invest in minority fund managers is just common sense.
“All the investment smarts don’t belong to fat, ugly white guys,” says CalSTRS Chief Investment Officer Christopher Ailman.