CalPERS Hedge Fund Ethics

CalPERS Tightens Ethics Following Probe into Hedge Funds

2009 has been a year for reviewing ethics policies and reexamining internal controls. America's largest pension fund is tightening its ethics rules following a minor scandal involving two hedge fund advisers. CalPERS has announced that the president of its board can now discipline board members and all will have to go through annual training sessions.

The decision follows a probe into the fund's paying of $36 million to two hedge fund advisers to manager the fund's money without the required contracts. Kurt Silberstein, who heads the hedge fund portfolio management, has been fined and placed on temporary administrative leave.

The California Public Employees’ Retirement System’s board gave its president the power to discipline board members whose actions violate the $200 billion pension’s policies. It will also require annual training sessions.

The moves follow the revelation last month that CalPERS had paid some $36 million to two hedge fund advisers that were managing its money without a contract, as is required. The advisers in question, Pacific Alternative Asset Management Co. and a UBS unit, had both run portfolios for CalPERS since 2003.

As a result of the ensuing investigation, Kurt Silberstein, the pension’s senior portfolio manager for global equity and pointman on its $5.8 billion hedge fund portfolio, was fined and put on temporary administrative leave.

“By toughening our governance policies, we’re making sure that board members are held to the strictest standards,” board president Rob Feckner said. “The guidelines help us keep the focus on what’s important—the quality of our investments.” Source

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