CalPERS Makes Investment, Takes Stake in Emerging Managers

According to a press release, CalPERS earmarked $150 million each to:

• TOBAM of Paris, France, an institutional investment company that specializes in quantitative core strategies, and
• Victoria, a San Francisco, California company focused on emerging markets.

The investments are part of the pension fund’s Manager Development Program II (MDP II) for public equity investment.  CalPERS will receive an undisclosed equity stake in each of the new MDP II firms in exchange for working capital. Additionally, Quotient, a majority employee-owned firm with MDP II since 2008, will receive $100 million for a new environmental, social and governance product.

“These emerging managers will play an important role in our effort to nurture potential diverse major players in the financial markets,” said Joseph Dear, CalPERS Chief Investment Officer.

According to the announcement, MDP II provides assets to small and emerging public equity firms that have no more than $2 billion of assets under management. It also supplies venture capital in exchange for a significant but minority equity stake. MDP II’s two advisors brought the new firms to CalPERS: Legato Capital Management with Victoria and Strategic Investment Group with TOBAM. Both should be funded by the end of the second quarter, according to the announcement.

TOBAM, an employee-owned business, builds portfolios of low correlated stocks that have uncommon risk and rebalances the portfolio to fixed weights on a monthly basis. TOBAM generates relatively high returns with less volatility than benchmarks that are weighted for market capitalization. Victoria identifies companies that will benefit from changes in the global economy based on macroeconomic analysis, major themes and in-depth investigation. The firm selects stocks based on country and sector factors.

CalPERS is the nation’s largest public pension fund with about $236 billion in market assets.