Date: 17/02/2005

Jordan was among 19 countries which Wilshire Associates says in a draft report have met Calpers’ emerging market investment requirements for inclusion on this year’s list. The Kingdom has been on Calpers list since 2003.

According to Brad Pacheco, a spokesman for the $182 billion California Public Employees’ Retirement System, best known as Calpers, Argentina, Sri Lanka, Thailand and Turkey are eligible to join the biggest US pension fund after falling short last year. Argentina, Sri Lanka, Thailand and Turkey failed to receive passing grades from Wilshire last year, Pacheco said.

Argentina and Turkey improved their scores enough to be included in Calpers’ list of permissible emerging markets for investment after the fund last year guaranteed the two countries one-year “cure periods” to raise their scores, Pacheco added. The other countries to receive passing grades from Wilshire were Brazil, Chile, the Czech Republic, Hungary, India, Israel, Malaysia, Mexico, Peru, the Philippines, Poland, South Africa, South Korea, and Taiwan.

Wilshire assesses investment risks in emerging markets by looking at political stability, transparency, labour practices, market liquidity and volatility, legal systems and investor protections, market openness and transaction costs. Countries that receive scores of 2.00 or above, out of a possible 3.00, are recommended to be eligible for Calpers investments, a distinction many countries actively pursue.

The government of the Philippines was especially aggressive in lobbying Calpers last year to be one on its list, dispatching high-ranking officials to personally appeal to its board. Hundreds of Filipino-Americans, including veterans, filled the board’s Sacramento, California chambers to lend support.

A number of Calpers board members have openly questioned if the fund’s emerging markets standards are too demanding, costing the fund potentially lucrative opportunities. According to Wilshire, China, Colombia, Egypt, Indonesia, Morocco, Pakistan, Russia and Venezuela had scores below Calpers’ 2.00 threshold for inclusion on its list this year.

Wilshire’s results will be presented to the Calpers board later this month and its final decision on this year’s list is expected in April. The results are also being shared with diplomats from the surveyed countries and with officials of stock exchanges in those countries to see if new data could improve scores, Pacheco said.

Of the 27 emerging markets Wilshire surveyed, 12 improved their scores from last year, 11 saw scores slip and four posted similar scores. “The greatest improvement from last year was experienced by Hungary, while the greatest decline was experienced by Israel,” the draft report indicated.

An index of Calpers’ restricted emerging markets investments underperformed the FTSE Emerging Markets Index by 2.4 percent on an annualised basis between April 1, 2002 and Dec. 31,2004, the report marked.

Meanwhile, some Calpers board members said this week the biggest US pension fund should consider ways to invest in China, Russia and other emerging markets and failed to meet its investment litmus test. California Controller Steve Westly, a Calpers board member, said he is concerned that Calpers risks missing out on China’s growth. China’s absence from Calpers list “stands out like a sore thumb,” Westly indicated.

“We could be leaving a lot of money on the table,” Westly told Reuters during an interview. “We could be missing an opportunity to be a positive influence.”

As for Russia, it is too important a market for Calpers to ignore and the fund should consider drafting an “engagement strategy” for investing there, board member Priya Mathur said

China scored 1.50 and Russia scored 1.79 in Wilshire’s survey.