US fund wins few backers in City

JOHN EISENHAMMER

Financial Editor

A wave of cynicism yesterday greeted calls by the largest public pension fund in the US for more aggressive shareholder activism in Britain.

Calpers, the Californian pension fund that controls nearly $100bn of pension funds, said it wanted to bring its assertive style to underperforming management in Britain.

But the suggestions were described as "extraordinary propositions" by leading UK fund managers.

The California Public Employees Retirement Fund, which has earmarked about pounds 2bn for the UK and European markets, has made a name for itself in the US with its high-profile exposure of underperforming management.

Speaking yesterday in London, Charles Valdes, chairman of Calpers' investment committee, said the time was right for it to become engaged in countries such as the UK.

He spoke of the so-called Calpers effect, whereby publicity about poor management, including a blacklist of companies, had led to a marked turnaround in performance.

Having decided to allocate some 20 per cent of Calpers' $100bn (pounds 66bn) portfolio to overseas investment, including a significant proportion in the UK market, Mr Valdes said the group wanted to become more engaged in corporate governance in these countries.

But leading British fund managers expressed doubts about what his proposals meant in practice.

"The UK probably has one of the best developed processes of corporate governance in the world. It is hard to understand exactly what Calpers can bring to this party apart from headline-grabbing," a top investment manager said.

Mr Valdes said: "Our motto will be to work co-operatively and to work collaboratively, not confrontationally ... the first element is the development of corporate governance principles for each market."