CalPERS puts India on investment radar

India, Philippines, Peru emerging equity markets.

Now India is one up on China. CalPERS (California Public Employees' Retirement System, the largest pension fund in the US), has decided to put India on its investment radar. China continues to be on CalPERS non-investable list.

The decision taken on April 19, came around two months after it said India was not on its investment radar as it failed to meet the necessary standards.

The CalPERS Board of Administration voted to add India, the Philippines and Peru to its list of permissible emerging equity markets, according to a press release issued by the entity in Sacramento, California.

CalPERS has around $2 billion invested in emerging market equities, while its total investments are to the tune of $166 billion.

The decision to include India and the other two countries was taken after a reassessment of their "scores" based on several parameters, including market efficiency, corporate governance practices, transparency, political stability and the labour practices of the markets concerned.

CalPERS consultant Wilshire Associates was instructed to re-evaluate any new findings about any countries in the system's annual permissible equity analysis that reviewed markets against a variety of factors. The Philippines score was raised after changes the country made to its laws and procedures.

India and Peru moved to new global standards for trade settlement after their decision to settle trades one day after the trade date. This effectively means that Indian stock markets will have to move to the T+1 settlement cycle as per the proposed schedule on July 1, 2004.

"These three countries have made significant progress and demonstrated that they now meet our high standards for investment," said Sean Harrigan, president of CalPERS Board of Administration.

"This is an example of our policy having a positive effect in the emerging markets." He said considering the strict criteria, which CalPERS followed in its investment strategy, it would send out the right signals to the retirement funds segment abroad.

Investable emerging equity markets now include Argentina, Brazil, Chile, the Czech Republic, Hungary, India, Israel, Jordan, Malaysia, Mexico, Peru, the Philippines, Poland, South Africa, South Korea, Taiwan and Turkey.

Following equity markets would continue to be on the non-investable list: Morocco, Sri Lanka, Thailand, Colombia, China, Egypt, Pakistan, Russia, Venezuela and Indonesia, CalPERS said in its release.

Sanjay Sachdev, managing director and CEO of Principal Asset Management Company, a leading player in retirement funds, said it would open the floodgates for other such funds to follow. "It's a re-affirmation of the growth story in India and the steps we have taken to improve our market delivery system," he said.

Other market participants, however, are not so gung ho about the entry of CalPERs. The pension fund insists on strict corporate governance practices in the companies in which it invests. According to market sources, it will invest only in the Indian subsidiaries of well-known global multinationals.

Owing to its strict guidelines, the pension fund has the ability to influence market regulators and induce corporate reforms. The entry of CalPERS into any country usually serves as a good pointer for other international investors.

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Big bucks to invest

• The California Public Employees' Retirement System (CalPERS) provides retirement and health benefits to more than 1.4 million public employees, retirees, and their families and more than 2,500 employers. It reported an income of $9.78 billion in 2002-2003.
• Market value of investment portfolio (as on February 29, 2004): $166 billion.
• Current allocation target for the $166 bn: 26% in global fixed income, 39% in equity in the US, 19% in international markets, 7% in alternative investment/private equity; 9% in real estate, among other things.