Biggest US state pension fund returning to RP

WASHINGTON — The biggest pension fund in the US has voted unanimously to put the Philippines back on its Permissible Country List for investments following the discovery of an erroneous data in its country profiling system.

The California Public Employees’ Retirement System (CalPERS), which manages more than $150 billion in assets, said Monday it had recalculated the evaluation of the Philippines in its grading system.

In its recalculations, CalPERS effectively gave the Philippines a passing grade that classified the country as an eligible destination for some $15.7 million worth of stock investments.

Last Feb. 20, CalPERS said it was pulling out of Indonesia, Malaysia, Thailand and the Philippines following a review of emerging equities markets.

The pension fund, which has some $1-billion investments in emerging markets in Southeast Asia, Latin America and Eastern Europe, explained that the said countries needed improvements in certain areas before investments could be made there.

CalPERS said it was shifting its investments to Poland and Hungary.

Following the announcement of the pullout, Ambassador to Washington Albert de Rosario addressed the CalPERS board in Sacramento, California, citing key economic indicators that "illustrated the strength of the Philippine economy." These included political stability, inflation at a 21-month low, employment up by 6 percent and a strengthening peso.

CalPERS later revealed that it reversed the decision after detecting an error in information that had mistakenly profiled the Philippines as a "backward market" that uses a manual system of trading at the Philippine Stock Exchange (PSE).

"The change is due to data error," said William Crist, president of the CalPERS board of administration.

After meeting with Finance Secretary Jose Isidro Camacho, CalPERS officials agreed to review the evaluation that was based on wrong information about trading practices at the PSE.

Camacho explained that the earlier decision to pull out was based on two considerations: the country factor and the market factor.

The country factors include political stability, transparency and labor practices while market factors include market liquidity, volatility, capitalization and transaction costs.

Although the Philippines scored high marks in the country evaluation, it failed to meet certain criteria under the market evaluation.

The finance chief pointed out that CalPERS has never even heard of the Philippine Central Depository (PCD) and its book entry system that allows scripless trading at the PSE.

"They thought our stock market was totally manual," Camacho said. "I also told them that we have an open market, there are no restrictions on repatriation and that foreign investors can even buy indirectly onto media concerns."

Camacho said new information on investor protection and market regulations that may have been overlooked in CalPERS’ earlier analysis was provided by the Philippine government, prompting the reversal.

"Clearly they now agree with our new data," he said. The decision is not just a business decision by a large international pension fund, but an affirmation by a leading international investor that the Philippine Economic Plan is on track and we are making progress in rebuilding the nation’s economy."

Del Rosario, in a statement released by the Philippine Embassy in Washington, said: "CalPERS is a bellwether for investors the world over and has enormous impact on the marketplace. I appreciate the rapid response of CalPERS in reversing their earlier position after being apprised of current developments. CalPERS’ action strengthens the belief that the Philippines is regaining the confidence of investors around the globe."

Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura said the decision was a good signal to possible investors.

"A lot of investments funds look for CalPERS for leadership. This should encourage other investors to follow suit," he said.

CalPERS provides health care and retirement benefits to more than 1.2 million employees of state schools and local public agencies. - Jose Katigbak, Des Feriols, Pia Lee-Brago