CalPERS Tags $350 Million for Venture Capital

The California Public Employees’ Retirement System on Wednesday said it has earmarked up to $350 million for new venture capital investments, an increase of about 60% for the investment category, with much of that money to be invested in Californian high-tech companies.

“The pace of innovation technological advancement in California is accelerating, creating significant investment opportunities,” said Charles P. Valdes, chairman of CalPERS’ investment committee.

The nation’s largest public pension fund is putting more money into venture capital because such funds promise high returns. Venture capital funds jumped more than 34% annually between 1990 and 1996, the $120-billion fund said.

Currently, venture capital investments account for $573 million of CalPERS’ $3.4 billion in alternative investments, including buyout funds.

The fund said it will hire a manager that will form a partnership, limited liability company or joint venture with CalPERS. The fund expects the money to be invested as early as September.

Separately, CalPERS approved practices it wants Japanese corporate boards to adopt.

CalPERS, which has more than $4 billion invested in Japan, wants companies there to end cross-shareholding, adopt formal counting practices for all shareholder votes, link executive compensation to performance and improve disclosure.

These improved corporate governance practices are necessary for Japan to attract foreign capital and compete globally, the fund said.

“Japan needs to demonstrate that corporate assets are being managed in the best interests of the company and its owners,” said William D. Crist, president of the pension fund’s board. “We have a duty to ensure that our investments are sound and that the management of corporations in which we invest produce value.”

CalPERS said Japanese boards should include directors who are independent from the corporation and its affiliates, reduce the number of board members, and appoint auditors who are independent from the corporation and its affiliates.

CalPERS wants corporate leaders to use these principles and others identified by the Corporate Governance Forum of Japan as a guideline for their boards.

CalPERS will promote these principles with local investors and shareholders in the year ahead. It probably won’t target individual companies, as it does in the U.S.

CalPERS is also developing board guidelines for companies in Germany and has written guidelines for Britain and French companies.