With all the brouhaha over the
mutual fund industry and its scandal-ridden recent past, California’s
massive public pension fund, known as CalPERS, has led the pack of
investors trying to clean up the industry by dumping funds that haven’t
played by the rules. However, there is one fund manager – Dimensional
Fund Advisors of Santa Monica — that will certainly not lose its
CalPERS contract. That’s because yesterday Arnold announced that he has
retained his ownership stake in Dimensional, even though, as Governor,
he has a hand in deciding where CalPERS invests its billions.
Officially, we know that the Governor has at least a $1 million piece
of Dimensional, but reports have suggested that he owns a "significant"
stake in the company.
This is one of the reasons that ArnoldWatch believes the Governor
should cut ties with the firm. CalPERS, the nation’s largest pension
fund, is run by a Board to which the Governor makes almost a third of
the appointments. While Arnold might never "demand" it, you can be sure
that his appointees, and the other members, many of whom have direct
political ties to the Governor, are not going to ditch Arnold’s
investment firm if push came to shove.
To live up to his promises of cleaning up Sacramento, the Governor
should not own a company that has a major contract with the state. (If
Arnold keeps the company and still wants to live up to his definition
of special interests – "a group with business before the state" – he
would have to stop talking to himself!)
Arnold’s spokeswoman justified Arnold maintaining his stock in
Dimensional, even though he sold off most other stocks in his
portfolio, by saying his ownership of Dimensional has been placed in a
blind trust. Now, that’s silly. It ain’t a blind trust if you know
what’s in it.
Coming soon, the other reason that Arnold must divest from Dimensional.
And thanks to the ArnoldWatch tipster that identified the CalPERS conflict.