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  2. PENSION FUNDS
March 15, 2022 03:32 PM

CalPERS’ exposure to Russia is 0.17% of total portfolio

Arleen Jacobius
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    Ukraine_Protest_i.jpg
    AFP via Getty Images
    Protesters hold placards in support of Ukraine in Prague.

    CalPERS’ investment committee discussed the pension fund’s exposure to Russian investments during its meeting Monday and heard a panel discussion on investing in emerging markets.

    As part of a new asset allocation adopted in November, the $466 billion California Public Employees’ Retirement System, Sacramento, increased its allocation to emerging markets sovereign bonds to 5% from 1%.

    Prior to the panel discussion Dan Bienvenue, CalPERS’ interim CIO, noted that the pension fund has exposure to Russia in its public equity, private equity and real asset portfolio.

    “Those investments … likely will continue to experience some impairment in value,” and exit strategies are limited, Mr. Bienvenue said. “Fortunately, however, we have no Russian bond exposure.”

    CalPERS’ investments in Russia represent about 0.17% of CalPERS’ total investment portfolio.

    See more of P&I's coverage of the war in Ukraine

    “These events regarding Russia and the Ukraine are another stark reminder of the geopolitical risk and realities that investors must contend with when managing a global portfolio like ours,” Mr. Bienvenue said. Emerging markets investments come with higher uncertainties and risk but also “greater opportunities for growth as well as diversification benefits.”

    Speakers on the panel discussion — Axel Christensen, chief investment strategist for Latin America at Blackrock; Greg G. Olafson, co-president of the alternatives business at Goldman Sachs Asset Management; Pramol Dhawan, a managing director, portfolio manager and head of the emerging markets portfolio management team at Pacific Investment Management Co. — lauded emerging markets for their diversification and return potential. All of the speakers acknowledged that emerging markets investments are less liquid and investors might have to wait longer than they intended before they can exit their investments.

    Mr. Christensen noted that investing in companies in emerging markets gives investors a greater opportunity to influence and encourage them to adopt ESG policies and investment practices.

    He suggested that investors could “leverage the fact that emerging markets are less liquid,” Mr. Christensen said. “And why is that? Because again, you have to be part of the change. Divesting is kind of a luxury you don’t have (in) a lot of emerging markets. You can’t vote with their feet. You can’t just run away. You have to be involved.”

    At Wednesday’s board meeting, CalPERS CEO Marcie Frost reiterated CalPERS’ “solidarity with the Ukrainian people who are suffering in the midst of this attack from Russia.”

    While its investments in Russia are small, amounting to about $900 million in Russian-related investments, Ms. Frost said pension fund officials are continuing to “assess our options and follow all federal sanctions and directives.”

    Separately, CalPERS is monitoring a California bill that would prevent CalPERS and the $319.8 billion California State Teachers’ Retirement System, West Sacramento, from investing in fossil fuel companies and require them to divest from current investments by July 1, 2027. Staff did not ask the board to take a position on the bill. CalSTRS board on March 3 voted to oppose the legislation.

    CalSTRS is also monitoring a state bill that would require it, CalSTRS and other of the state’s pension funds to divest from companies that have business operations in Russia or Belarus, or that supply military equipment to Russia or Belarus.

    “This bill goes beyond Russian companies and the actions this board has already taken,” said Danny Brown, chief of CalPERS’ legislative affairs division.

    “This would require us to divest from any U.S. or national company that is doing business in Russia,” resulting in significant amount of work to identify companies still doing business in Russia, Mr. Brown said.

    CalPERS plans to potentially comment on two SEC rule proposals: one on cybersecurity risk reporting for public companies, and an upcoming proposal on climate risk reporting, Mr. Brown said.

    Related Article
    U.S. funds: Biggest pension plans act quickly on Russia
    San Francisco, Chicago Teachers join in Russia divestment march
    New Jersey OKs Russian divestiture bill for state pension fund
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