The California Employees Retirement System owns about $500 million worth of Orange County’s publicly traded companies.
The pension fund owns stakes in about 60 companies here, according to a breakdown by CalPERS, the country’s largest pension fund manager with about $245 billion under management.
In all, CalPERS owns stakes in more than 5,000 U.S. public companies as well big holdings in real estate and other private investments.
At the end of 2006, CalPERS’ five largest investments in OC companies were:
– Irvine chipmaker Broadcom Corp. at about $82 million, or half a percent of the company.
– Irvine drug maker Allergan Inc. at about $90 million, or half a percent.
– Santa Ana-based title insurer and business data provider First American Corp. at about $86 million, or 1.75%.
– Newport Beach-based savings and loan operator Downey Financial Corp. at about $21 million, or 1%.
– Irvine heart valve maker Edwards Lifesciences Corp. at about $17 million, or less than 1%.
CalPERS takes small stakes in companies to limit risk, spokesman Clark McKinley said. It aims for broad ownership across thousands of stocks, he said.
“Generally, our share of ownership of public companies are in the single digits, and in most cases, under 1%,” McKinley said.
The goal is to match or beat the broader market as measured by the Standard & Poor’s 500.
For the 12 months through April, all of CalPERS’ U.S. stock holdings were up about 14%, versus about 13.5% for the S & P; 500.
The pension fund expects annual returns of about 7%, McKinley said.
In OC, CalPERS likely has seen its share of hits and misses. The pension fund didn’t disclose timing of buying or selling, other than to say it tends to invest for the long term. But a look at its holdings offers some basis for speculation.
Likely winners here include Irvine-based healthcare software provider Quality Systems Inc., one of the county’s best performing stocks in recent years. CalPERS owns about a $6 million stake.
Another is Costa Mesa-based clothing designer Volcom Inc., which has more than doubled since August. CalPERS stake: about $7 million.
First American could be another hit. Its shares are up about 45% since November.
CalPERS also stood to get in on some buyout premiums from companies acquired here.
The fund had owned stakes in Costa Mesa-based FileNet Corp., bought in October by IBM Corp., Newport Beach-based Sybron Dental Specialties Inc., bought by Danaher Corp. in mid-2006, and Irvine’s Commercial Capital Bancorp, bought by Washington Mutual Inc. in October.
Likely Misses
CalPERS may not have done so well on other investments.
The fund owns about 65,000 shares of bankrupt subprime lender New Century Financial Corp. of Irvine. A year ago, the stake would have been worth about $3 million. Today it’s down to about $20,000.
CalPERS also had a stake in another company that filed for bankruptcy, Irvine-based Gardenburger Inc., which emerged last year as privately held Wholesome & Hearty Foods Co.
The fund also likely has seen a drop in Irvine homebuilder Standard Pacific Corp., which is down about 30% from a year ago.
Irvine’s Local.com Corp., a provider of Internet search advertising, could be another dog. The company, formerly known as Interchange Corp., has seen its shares fall nearly 90% since 2005.
CalPERS is known as an activist shareholder, often pushing for changes in how companies are governed. Its activist CalPERS Governance Fund is up about 15% for the year, McKinley said.
Last week, CalPERS said it plans to double the amount of money it allocates for activist investing. More than $10 billion will be put toward investments where CalPERS seeks to influence changes.
Santa Ana-based Corinthian Colleges Inc., a vocational school operator, was added this year to CalPERS’ “hit list” of companies it believes it can make better.
Corinthian Colleges is on the list for weak performance, poor leadership and a lack of board accountability, according to CalPERS.
Corinthian’s shares are on an upswing this year, up about 15%.
They bottomed out in October, after falling nearly 30% from their spring 2006 high amid a Securities and Exchange Commission options probe, student lawsuits and declines in enrollment.
CalPERS owns about $1 million in Corinthian’s stock, or a tenth of a percent of its outstanding shares.
The fund said it plans to push for easier removal of Corinthian’s directors by holding yearly elections rather than keeping staggered terms in place.
In the past, CalPERS has sought to influence corporate governance at Broadcom and Allergan.
