The biggest pension fund in the world California Public Employees' Retirement System (CalPERS) is to continue investing in the Tel Aviv Stock Exchange despite the deep recession and ongoing violence in the region.
The CalPERS investment committee on Tuesday voted in favor of the new policy for investments in emerging markets, which was announced on Wednesday. The policy is based on comprehensive analysis conducted by consultancy firm Wilshire Associates. The research included an examination of volatility and liquidity levels, openness of financial markets, the cost of carrying out operations, political stability, financial visibility, and other factors.
Israel was graded third, scoring 2.33 points, after Argentina, which scored 2.63 points, and Taiwan, which scored 2.56 points. Israel's rating was largely affected by the high score given to the openness of the capital market, protection granted to investors by the legal system, market regulations, and efficient clearance system.
CalPERS investment managers will be authorized to invest only in stock markets of the following countries: Israel, Argentina, Brazil, the Czech Republic, Hungary, Chile, Mexico, Peru, Poland, South Korea, South Africa, Taiwan and Turkey.
The new policy will affect assets worth $1 billion invested in emerging markets. The fund will sell its holdings in Indonesia, Malaysia, the Philippines, and Thailand. These counties didn't meet the harsh new criteria. CalPERS is to begin investing in Poland and Hungary.
Analysts estimate that other American pension funds will reconsider their investment policy in emerging markets.
The Thai Finance Minister Somkid Jatusripitak today said that it expects that foreign investment funds will continue investing in Thailand despite CalPERS's decision. The fund committed to investing last October $75 million in a fund supported by the Thai government, the minister said.