Posted on 06/30/2005 8:06:23 PM PDT by calcowgirl
SINGAPORE – CalPERS, the biggest U.S. pension fund, is considering property investment in China, a country where its own corporate governance and human rights rules prevent it from investing in stocks.
The California Public Employees' Retirement System, which has $183 billion in equity, has only $1.2 billion invested in property outside the United States.
But sensing a peak in the U.S. property market, CalPERS is paring down the U.S. portion of its $22 billion property portfolio by at least $7.5 billion, according to Michael McCook, its senior real estate investment officer.
Meanwhile, it aims to raise its foreign property assets to as much as half of total real estate investment in five years, from about 10 percent now, partially through purchases in markets like China and India.
India was included this year on a list of countries that satisfies CalPERS' stock investment criteria on issues such as human rights, market transparency and freedom of labor unions. China failed to make the list.
McCook said he would argue to the CalPERS investment committee in September that his proposed property investments and partnerships in China could meet the fund's standards.
"Say we do for-sale housing, we're providing a service people need and we can control our project," McCook said at a property conference in Singapore.
He said CalPERS could, for example, make sure workers at any local partner received adequate pay and benefits – which would be impossible when investing in stocks.
"You can't control a publicly listed company's human rights policy," he said.
Since CalPERS began investing in overseas property in 2002, McCook has voluntarily adhered to the fund's investment policies for stock markets, but he said it was not obligatory.
McCook is proposing an outlay of up to $200 million for a partnership with a Chinese developer to build housing and retail property.
He wants to invest twice that much in a Japan-focused property fund managed by AETOS Capital Japan, which has earmarked 25 percent of its funds for foreign investment and will probably include China.
McCook said he had been hopeful the CalPERS investment committee would agree to the investment, but reactions in the United States to a bid by Chinese oil firm CNOOC for U.S. energy company Unocal had made him less optimistic.
"Some sentiment might shift. You're dealing with personalities here," he said.
The fund has sold $6.5 billion of U.S. property so far this year and will sell an additional $1 billion to $2 billion from its industrial and apartment portfolio by the end of the year, McCook said.
CalPERS plans to put at least $500 million into a fund to invest in real estate investment trusts outside the United States and will raise its investment in Asia, where around $800 million is now committed.
McCook said he was looking into building houses in India, which eased rules on foreign investment in property early this year.
"They're both going to be huge," he said of the Chinese and Indian markets. "You can't ignore them. It's just a matter of when to go in."
commies supporting commies... if ANY US-based corporation treated its employees like the average Chinese corporation does, CalPERS would refuse to invest.
By engaging in capitalism. Hmmmmmmmm....
Headline indicates they are investing in San Francisco.
Poker and CalPERS ,, should be an interesting game.
I predict those will be the most profitable investments ever. China is growing by leaps and bounds. It's good to get in early.
Until, of course, the ChiComs sequester or expropriate CalPERS' assets, which they will, they will...merely a matter of time.
Do they have enough to buy the whole place?
"...the most profitable ever..."
They will no doubt go up fast but there is always that thought that China will immitate the New London, Connecticut planning board and decide to take the property leaving Calpers out in the cold.
This is certainly a shot in the dark.
These government pensions should be made to bear the risk of their own investments. If they lose money, the pensions are smaller.
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