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May 12, 2010
Pension funds: We're complying with Iran law

Officials with California's two public pension funds tried to convince legislators today that they're complying with a law requiring the sale of stocks of international companies doing business in Iran - even though they've dumped almost none of their holdings.

CalPERS and CalSTRS told the Assembly Accountability Committee that they're following the law by pressuring the companies to pull out of Iran. In many cases, they said they've succeeded, and only a handful of their investments have any Iran ties.

Only CalSTRS, the California State Teachers' Retirement System, has actually sold any stocks because of the 2007 law.  The board of the California Public Employees' Retirement System has decided not to sell any stocks in deferrence to its fiduciary duties - its legal obligation to make as much money as possible for its members.

Committee members were mostly satisfied with the explanation but Chairman Hector De La Torre, D-South Gate, said he believes the pension funds should part ways by year's end with companies that refuse to change their business behavior in Iran. CalPERS and CalSTRS should be able to find "equivalent or better investments" without harming their portfolios, he said after the committee hearing.

CalSTRS and CalPERS have come under fire for not unloading their Iran-related investments. But officials with the funds say they can exert more influence through "constructive engagement" than by selling their stocks.

"When we sell the stock, it's like taking our ball and going home," said Chris Ailman, CalSTRS' chief investment officer.

But Cliff Berg, representing the Jewish Public Affairs Committee, said CalPERS and to a lesser extent CalSTRS are simply ignoring the law. It "was the Iran Divestment Act, not the 'Iran engagement act,''' he told the committee.

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