CalPERS pulls out of Asean; RP fate hangs

The US-based California Public Employees Retirement System (CalPERS) has completely liquidated some $1.1- billion worth of assets in Indonesia, Malaysia and Thailand but its investment in the Philippines still hangs on a balance as the government finalizes its report disputing the fund’s decision to classify the country as non-eligible for its investments.

CalPERS reported this week that it has completed the realignment of its investments in emerging markets where Southeast Asian countries accounted for 9.5 percent of the assets marked for liquidation.

According to CalPERS, the liquidation of its Southeast Asian investments was pursuant to the results of the emerging markets country screening process that the fund manager undertook in 2002.

"The Investment Committee developed and approved a recommendation by Wilshire Associates for a new emerging markets Permissible Country list," CalPERS said in its report. "With this new list, three emerging markets countries were eliminated from the Permissible Country list and needed to be liquidated entirely. The countries were Indonesia, Malaysia, and Thailand."

According to CalPERS, its investment committee was directed to "transition" approximately $1.1 billion in assets from the passive emerging markets portfolio to the three new active emerging markets managers.

The future of CalPERS‚ Philippine investments, however, is still uncertain as the fund awaits the presentation to be made by the Philippine government sometime next week.

CalPERS had initially removed the Philippines from its list of "permissive countries" but after meeting with Finance Secretary Jose Isidro Camacho, fund officials decided to retain the Philippines in its investment portfolio pending the submission of various reports disputing the initial evaluation made by Wilshire Associates.

"We’re finalizing the report now and it’s at least four inches thick," Camacho said yesterday. "We will be submitting it to CalPERS for their evaluation."

However, Camacho was deliberately vague on whether CalPERS‚ decision was actually contingent on this report and that it could still reverse the decision to retain the Philippines in its investment portfolio.

"But I think the more important development is that CalPERS has agreed to take cognizant of the impact of their watchlist on market perception," Camacho said. "I pointed out that CalPERS to us is more important than their investment, because the market watches what they do."

Camacho said CalPERS admitted there was a need to review its listing policy and management has been directed to re-evaluate its practice of shuffling its investment list every year.

Camacho explained that one option being considered was to delist countries only after they have registered declines in ratings for two consecutive years instead of annually.

"I told them they have to be more circumspect and avoid being abrupt when they list and delist countries," said Camacho. "For us, we appreciate the level of transparency that they exercise."