CalPERS and Progress Highcrest Advisors Select Arrowstreet Capital to Manage $100 Million; Arrowstreet to Receive $3 Million Equity Investment.

Business Editors

SACRAMENTO, Calif.--(BUSINESS WIRE)--June 1, 2000

The California Public Employees' Retirement System (CalPERS) and Progress Highcrest Advisors LLC, announced today that they have chosen Arrowstreet Capital, L.P. to manage $100 million of international equity as part of the pension fund's innovative Manager Development Program (MDP).

CalPERS and Progress Highcrest Advisors will also make a $3 million investment in the Cambridge, Massachusetts-based Arrowstreet to acquire an equity stake in the firm. Progress Highcrest Advisors is a new joint venture formed by two California-based firms: Progress Investment Management Company, one of the country's leading multi-manager investment management specialists, and Putnam Lovell Capital Partners Inc., an affiliate of investment bank Putnam Lovell Securities Inc.

Arrowstreet is the first money manager chosen by Progress Highcrest and CalPERS in an effort by the pension fund to tap new and emerging money management firms to boost the System's investment returns.

"There is untapped talent in the money management arena that could benefit CalPERS investment portfolio," said Michael Flaherman, Chair of CalPERS Investment Committee. "With CalPERS assets and capital, and the support and assistance of Progress Highcrest, we can realize superior returns as firms like Arrowstreet grow and mature, and become significant players in the institutional marketplace."

Last year, CalPERS Board of Administration approved the establishment of the Manager Development Program and committed up to $4 billion in funding. The goal of the program is to achieve superior investment returns while providing opportunities to new and emerging money managers that typically do not have the long-time track record and marketing clout to compete against larger, more established firms.

In addition to providing funds to manage and venture capital to grow, CalPERS and its partner Progress Highcrest will provide the emerging firms with assistance in business management, accounting, technology infrastructure, marketing and other services related to development and business expansion.

The pension fund expects to realize profits from its equity positions when a firm goes public, when the equity position in a firm is purchased by other partners, or when a firm is bought out by larger established firms.

Progress Highcrest is expected to make up to $40 million in venture capital investments in firms selected for the Manager Development Program. Candidates for the program include U.S.-based firms managing public equity and fixed income securities with less than $1 billion under management.

Arrowstreet Capital currently has $200 million in assets under management. The money management firm was formed in July 1999 by Bruce Clarke (CEO), Peter Rathjens (CIO) and John Campbell (Research Director). The three founding partners were previously employed by PanAgora Asset Management where they were responsible for managing global investment products.

CalPERS is the nation's largest public pension fund with assets totaling more than $175 billion. The System provides retirement and health benefits to more than 1 million state and local public employees and their families. For further information on CalPERS, please visit the System's Web site at www.calpers.ca.gov.