Calif. Pension Fund to Examine Goldman Practices

The chief investment officer of California's giant pension fund said Monday he is disturbed by the allegations of wrongdoing against investment firm Goldman Sachs.


The California Public Employees Retirement System, which manages assets totaling about $210 billion, owns 1.8 million shares in the embattled money-management firm.

The stake was worth about $330 million last week, but Goldman shares have fallen more than 12 percent since the Securities and Exchange Commission filed civil charges against Goldman on Friday.

The SEC alleges Goldman misled investors about subprime lending and contributed to the nation's financial meltdown.

"We're very disturbed about the SEC charges," said Joe Dear, CalPERS' chief investment officer. "We'll follow that closely."

Dear said Goldman does not manage money for the nation's largest pension fund, but as an investor, CalPERS is interested in the company's risk management, shareholder communications and board independence.

"We'll see how this develops, and our corporate governance group will be examining Goldman Sachs' corporate governance with respect to their practices," Dear said.

CalPERS had scheduled a meeting to discuss those issues with Goldman before the SEC charges were filed.

The SEC alleged that Goldman sold risky mortgage investments without telling buyers they were crafted by a billionaire hedge fund manager who was betting on them to fail.

Dear added that CalPERS did not purchase the type of troubled mortgage securities under scrutiny.

"We have an initiative with all the major financial firms because of the credit crisis, and governance is clearly one of the contributing factors to the credit crisis," Dear said.

He said the recent news involving Goldman "adds an exclamation point to the urgency to address financial market reform regulation now."

Ricardo Duran, a spokesman for the California State Teachers' Retirement System, said in an interview that CalSTRS would also be reviewing its relationship and business activities with the firm.

CalSTRS manages about $132 billion in assets and serves approximately 459,000 active members in California.

Goldman Sachs manages a high-yield bond portfolio worth $650 million for CalSTRS, and the pension fund owns 2 million shares of Goldman stock, Duran said.