Is CalPERS a Sovereign Wealth Fund?

Ashby H. B. Monk wrote Is CalPERS a Sovereign Wealth Fund? (He ends up saying no.)

Sovereign Wealth Funds have come under increased scrutiny with countries concerned that an investment by a SWF could be used as a political tool and not a mere investment. The underlying concern is that many of the SWFs come from countries that at times are hostile to the United States and often lack a substantive rule of law. Ashby notes that there is some confusion as to what constitutes a sovereign wealth fund.

While all seem to agree that the China Investment Corporation and the Abu Dhabi Investment Authority are SWFs, there is a lively debate as to whether public pension funds, such as the California Public Employees Retirement System (CalPERS), are also SWFs. While CalPERS itself is adamant that it is not, others disagree. The stakes are high for a fund like CalPERS, as the SWF label could come with a high cost.

Ashby starts with several of the SWF definitions and creates this definition:

SWFs are government-owned and controlled (directly or indirectly) investment funds that have no outside liabilities or beneficiaries (beyond the government or the citizenry in abstract) and that invest their assets, either in the short or long term, according to the interests and objectives of the sponsoring government.

Based on this definition, Ashby concludes that CalPERS is not a SWF.

Ashby H. B. Monk is a Research Fellow at the Center for Retirement Research at Boston College (CRR) and the University of Oxford.

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