Mumbai, Feb. 19: California Public Employees’ Retirement System (Calpers), one of the largest pension funds in the US, has decided not to invest in India.
The company has named India, Pakistan and several other developing countries as forbidden markets.
However, Indian fund managers say that the pension fund had practically no presence in India and therefore its announcement would have little impact here.
Calpers considers several factors such as corporate governance, transparency, political stability, civil liberties before investing in a country. The company has ruled out investing in some of the world's largest countries which include China, India, Indonesia and Russia. It has also decided against returning to Malaysia and Thailand.
Calpers’ decision was based on an assessment of the stability and transparency of those countries, including such criteria as accounting standards and labour law.
The Calpers board has completely overhauled its emerging market investment policies and has voted against stock investment in 12 developing countries.
The company has also banned investments in Morocco, Sri Lanka, Egypt, Pakistan, Colombia and Venezuela.
Calpers’ move is significant as it has a portfolio of $ 133 billion in assets. Investment circles abroad had speculated that the pension fund would put Thailand and Malaysia back on its list of approved markets, but voted for tighter standards than an outside consultant had recommended.
If there are losers, there are countries that have benefited as well. Calpers has cleared investment for 14 emerging markets like South Korea, Poland, Israel, the Czech Republic, Hungary, Taiwan, South Africa, Chile, Mexico, Jordan, Peru, Argentina, Turkey and Brazil.
“Let them hang themselves,” said Arun Kejriwal of Kejriwal Research & Investment Services. However, other fund managers were less forthcoming in brushing away Calpers. The fund has invested $ 1.8 billion in emerging markets with a very small percentage finding its way into the Indian markets. However, experts point out that Calpers can set the tone for other institutional investors.
Marketmen are worried if Calpers’ decision would mean an immediate exit from those markets. However, Calpers has reassured that the fund would consider adding countries to a ‘watchlist’ before it sold off from those markets, allowing governments to correct the problems.
Last year, Calpers had decided to take into account external factors such as civil rights and political risk while making investment decisions. The company believed that investing in more stable countries with liberal practices would yield better long-term returns.