US - The giant California Public Employees' Retirement System's (CalPERS) Board is to allocate a further $1.7bn to the fund's active corporate governance investments, targeting managers in Japan and Europe as part of the plan.
And for the first time the $151bn fund - already regarded as a heavyweight in terms of shareholder rights issues - has also established an internal active corporate governance program, bringing CalPERS total active investment in corporate governance strategies to $3bn.
Details for the overall plan - which were approved at an investment committee meeting last week - include a $1.2bn investment to external active corporate governance managers focussed on the US ($500m); Japan ($400m), and Continental Europe ($350m), and a $500m allocation to set up the ‘CalPERS Internal Relational Program’.
Michael Flaherman, chairman of CalPERS investment committee, said: We have witnessed dramatic corporate governance reforms in Japan and Continental Europe in recent years.
These markets are increasingly emphasising the importance of shareholder issues and appear ready for additional change.
According to CalPERs, active corporate governance strategies typically involve two steps. Firstly, managers make a moderate investment and begin to communicate with company's management, board of directors and other investors. But if the company is not responsive to these demands, managers may increase their investment in the firm to provide greater leverage in negotiations. CalPERs said that its future strategy “may include taking a larger ownership stake in a company.
The formation of CalPERS’ $500m Internal Relational Program will focus on domestic active corporate governance strategies, and will look to create partnerships with external managers.
Initially, CalPERS will team up with Relational Investors, one of the System's current active corporate governance managers with which it invests $750m.
The Sacramento-based pension fund - the nation’s largest - also invests $350m with Active Value Capital, and $200m with the Hermosa Focus Fund, both UK-based active corporate governance managers. By Madhu Kalia
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