PE not included in California Iran ban

The state of California has passed a law requiring that CalPERS and CalSTRS divest from companies that do business in Iran, but unlike similar bans elsewhere, private equity is not affected.

California governor Arnold Schwarzenegger signed a bill this week requiring that the $256 billion (€180 billion) California Public Employees’ Retirement System and the $160 million California State Teachers’ Retirement System divest from Iran.

Gov. Arnold
Schwarzenegger

Specifically, the bill prohibits investment in “companies with business operations in the defense or nuclear sector of Iran or that are involved in the development of Iranian petroleum or natural gas resources and are subject to federal sanctions”, according to an analysis prepared by the state assembly's Public Employees Retirement and Social Security Committee.

A CalPERS’ spokesman said the bill will require a substantial reshuffling of the pension fund’s portfolio, but will only affect public equities. CalPERS estimates that it will have to divest from approximately $2 billion in assets, a process which could cost $10 million.

Last year Schwarzenegger signed a similar measure preventing the pension funds from investing in companies that do business in Sudan.

Illinois also passed a Sudan divestment law in late 2005, but that law banned pensions from investing in Sudan through private equity funds as well. As a result, at least two firms, TPG and TA Associates, expelled Teachers’ Retirement System of Illinois from their funds.