Calpers eyes back way to China investment
Tue Jun 28, 2005
By Dominic Whiting, Asia property correspondent
SINGAPORE (Reuters) - Calpers, the biggest U.S. pension fund with $183 billion in equity, is considering property investment in China, a country where its own corporate governance and human rights rules prevent it from investment in stocks.
The California Public Employees' Retirement System (Calpers) 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 its senior real estate investment officer Michael McCook.
Meanwhile, it aims to raise the portion of 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 growth markets like China and India.
India was included this year on a list of countries which satisfies Calpers stock market 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 it was possible to ensure the fund's standards were met by his proposed property investments and partnerships in China.
"Say we do for-sale housing, we're providing a service people need and we can control our project," McCook told Reuters in an interview during 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 started to invest 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.
SENTIMENT SHIFT
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, which 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 sowed some doubts in his mind.
"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 another $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 (REITs) outside the United States and will lift its investment in Asia, where around $800 million is now committed.
McCook said he was looking at house building 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."
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