Thursday, April 20, 2006

Calpers / Wilshire Associates

Dumb & Dumber

Calpers is the California pension fund. Not many would care what they do, but somehow over the last few years Calpers have been very vocal about what they buy and what they don't buy. Calpers practices responsible investing, or so they think. They avoid companies which treats employees or minority shareholders unfairly and stays away from regimes that they do not support. Throwing their weight around, it appears that the people behind Calpers are trying to enhance their jaded lives by living vicariously through Calpers. Calpers can be branded as ultra-conservative and belligerent (my system is the best system), much like the in-your-face Californians who will yell and question why you smoke in public.

In order to throw their weight around, Calpers needed better research and analytics to support their platforms and causes. They hired Wilshire Associates. Based on Wilshire's ranking systems, Calpers have recently decided to return to the Jakarta Stock Exchange. The news further fueled the rise in Indonesian stocks, which had already been rising steadily in recent months. Calpers had stopped all investing in Indonesia in 2003.

Calpers usually will make a big hoo-hah in their annual announcement of who's in, who's out, in their emerging markets investing strategy. Now most investment pros won't be bothered much with what they have to say. In fact, Calpers' strategy is being regarded as a good lagging indicator, rather than a more important leading indicator. Hence it may be toppish for Indonesian stocks!?

Calpers political voice box movement is tiring and incorrect. Wilshire Associates' analytics is highly questionable. For example, the decision to get back into Indonesian stocks was based on a rating of 2 (out of 3) given by WA on market worthiness. WA also ranks the following countries 2 out of 3: Turkey, Malaysia, Argentina and India. Investment pros in emerging markets would wince and roll their eyes at those scoring. That's paying a lot of money for a good deal of generalised B.S. When you pay for analytics, you are supposed to get all the nuances, value added distinction and analysis. I think from the report, its a very shoddy piece of advisory and research work.

WA also did a scoring on "creditors' rights", and had given Indonesia a BETTER score than Brazil, Malaysia, Hungary and Poland. To continue writing, I would have to use words that would generally not appear in any dictionary but in everyone's vocabulary. So, enough said.

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