UNITED STATES - The California Public Employees' Retirement System (CalPERS) is seeking to prohibit excessive rent increases and involuntary displacement of low-income households in its US multi-family residential investments.

The $213bn (€160bn) pension fund has adopted a new policy that will apply to all future investments and to previous investments where possible.

The CalPERS Board has in recent months listened to concerns from tenant groups about property managers eliminating rent-regulated housing units by converting them to market units or raising rents above regulated levels.

CalPERS will pursue remedies against managers that violate the new policy, and could opt to withhold committing new capital to them.

"This policy will help us ensure that external managers who deploy CalPERS capital won't inappropriately displace households in rent-regulated units as a result of their investment strategies," said CalPERS board president Rob Feckner.

"Such strategies have exposed CalPERS to risks and have caused adverse impacts to renters that must not happen again."

CalPERS investment committee chair George Diehr said the policy could be implemented without undermining the pension fund's fundamental goal of maximising risk-adjusted investment returns.

"At the same time, this protection of tenants is consistent with the United Nations Principles for Responsible Investment that are part of our own governance principles, which incorporate environmental, social and governance best practices into our investment decision-making process," he said.

The new policy is the latest in a series of steps being taken to overhaul CalPERS' real estate portfolio.

These include new leadership of the investment office and the real estate unit as well as ongoing restructuring and property valuations of housing and urban development programmes.

CalPERS adopted a new real estate policy in June 2009 to tighten fiscal restraints, debt limits and delegated investment authority not requiring board approval.

"We took some very tough medicine in real estate but are on the mend and applying extremely useful lessons to greatly improve our systems and controls," said chief investment officer Joseph Dear.

"Much of the bad news is behind us and we're well-positioned for solid performance."