State Pension Fund Buys $250-Million Stake in Cable TV

California’s massive public-employee pension fund has become the newest player in the cable-television sweepstakes by investing $250 million with Comcast Corp., the media giant that is buying the cable operations of Maclean Hunter Ltd.

A top official at the California Public Employee Retirement System (CalPERS) confirmed Friday that the $80-billion pension fund agreed to invest $250 million in cable ventures to be chosen by Comcast. Sources said Philadelphia-based Comcast will put the money toward its down payment on Maclean Hunter’s cable-TV division, which it agreed to buy in June for $1.27 billion.

Although officials at Comcast and CalPERS would provide few details of the venture, sources familiar with both groups said CalPERS would get a direct equity stake of 40% to 49% in Maclean Hunter and that Comcast would have the controlling interest.

“We want to be in cable, but we want Comcast to provide the expertise,” said Charles Valdez, a CalPERS director and chairman of its investment committee.

The deal would mark CalPERS’ first direct investment in a cable company and only its third direct equity investment. The pension fund, noted for its shareholder-activist role at dozens of blue-chip corporations, invests the retirement money of about 800,000 government workers and retirees in California.

Although CalPERS has already invested several million dollars in cable ventures, all of that money has been invested through limited partnerships in which the pension fund is merely a silent partner. The venture with Comcast would give CalPERS a big say in how Maclean Hunter is run.

Valdez said that if the venture with Comcast is successful, “there’s a very good chance” the pension fund will pursue “other cable opportunities.”

The value of cable holdings can be more volatile than more traditional pension-fund investments such as real estate, but a CalPERS official said cable still has a place in the fund’s portfolio.

“We try to balance out our portfolio and balance our risks,” said Hal Brown, a CalPERS investment officer in Sacramento. “That’s simply wise investing.”

In addition, Brown noted, a $250-million investment would be less than one-half of 1% of the fund’s assets.

Maclean Hunter is a diversified media company based in Toronto that is being purchased by Rogers Communications, Canada’s largest cable operator.

To pay off some of its debt, Rogers agreed to sell Maclean Hunter’s U.S. cable operations to Comcast. A Comcast spokeswoman said Friday that the purchase is expected to receive regulatory approval later this year.

Maclean Hunter has about 550,000 subscribers, most of them in Michigan and on the East Coast. Its purchase would make Comcast the third-largest cable operator in the nation, with 3.5 million customers.

CalPERS has been trying to invest more of its money directly in targeted companies to diversify its portfolio and boost its return. Such “private equity” investments also allow the fund to bypass investment bankers and avoid huge fees, and provide it with more influence on how the company is run.

CalPERS has such investments two other companies: Enron Corp., a natural-gas company based in Texas, and Wright Medical, a company that manufactures artificial joints.

The investments are overseen by an alternative-investments division created several years ago that also has holdings in 40 limited partnerships in diverse areas. The division’s investments account for 4% of CalPERS’ huge portfolio.