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CalSTRS Sets Fund Investment Rules

Fuller disclosure of mutual fund managers' fees and expenses is required by the teachers' pension fund.

March 04, 2004|Marc Lifsher | Times Staff Writer

SACRAMENTO — The $115-billion California State Teachers' Retirement System on Wednesday adopted a new set of governance and disclosure standards for mutual funds that receive investments from the nation's third-largest pension fund.

The standards, proposed by state Treasurer Phil Angelides in the wake of a series of mutual fund scandals around the nation, require fuller disclosure of expenses and fees charged by fund managers. They also mandate that any fund held by CalSTRS appoint independent directors to at least three-quarters of the seats on its board.

The CalSTRS board of directors unanimously endorsed Angelides' proposal. The vote, however, affects a relatively small amount of CalSTRS' money: $123 million in mutual fund holdings.

"The general consensus of the board is that this is another step toward supporting transparency," Kirsten Macintyre, a CalSTRS spokeswoman, said, referring to the practice of requiring more disclosure by investment companies.

Angelides, who as state treasurer is a member of the CalSTRS board, called the decision "a simple and clear" message that "if you are a mutual fund that wishes to do business with California, we expect you to adhere to the highest standards of disclosure and business practices."

CalSTRS' adoption of the mutual fund guidelines will have national repercussions, said Charles M. Elson, a corporate governance specialist at the University of Delaware. "CalSTRS is a big fund, he said. "A lot of people will move along with it."

Further action on the standards could come as early as next week when the California Public Employees' Retirement System, the nation's largest pension fund, will take up the issue. Public pension funds in New York and North Carolina also are studying the proposals.

In December, CalSTRS fired Putnam Investments after regulators charged the mutual fund firm with allowing improper trading by favored investors, potentially hurting the returns and increasing the expenses of the firm's other clients.

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