Presented by Henry Cisneros CalPERS and CalSTRS Conference San Jose, California April 25, 2006

1. EXPANDING INVESTMENT OPPORTUNITIES THROUGH DIVERSITY Presented by Henry Cisneros CalPERS and CalSTRS Conference San Jose, California April 25, 2006

2. 21st Century Themes • Life at Hyperspeed • Interconnected by Computers and Multi-media Tools • Biotechnology Marvels • Aging of Traditional Population • Globalization

3. Fundamental Demographic Shifts

4. Population Distribution Source: U.S. 2000 Census & U.S. Census Bureau Population Division, Population Projections of the U.S., Total Population by Race, Hispanic Origin, & Nativity

5. African-Americans 34.65 million 1990-2000: 16% growth

6. Growing Influence on U.S. Culture • Fashion Trends • Language and Culture • Music • Religion & Philosophy • Sports

7. Profound Influence on U.S. Culture National Icons: Shaquille O’Neil Oprah Winfrey Bill Cosby Cultural Pacesetters: Denzel Washington Toni Morrison Halle Berry

8. Profound Influence on U.S. Culture Athletic Heroes: Tiger Woods Tim Duncan Michael Vick Ken Griffey Classical Grace: James Earl Jones Wynton Marsalis Leontyne Price Jessye Norman

9. Martin Luther King Andrew Young Profound Influence on U.S. Culture Moral Philosophy: e Cornel West Public Leadership: Jesse Jackson Condoleezza Rice Colin Powell Barack Obama

10. Asian-Americans 10.2 million 1990-2000: 41% growth Highest Median Household Income

11. Growing Influence on U.S. Culture • Cuisine • Architecture • Design Aesthetics • Pacific Rim Commerce • Literature, Religion and Philosophy • Fashion

12. Growing Influence on U.S. Culture Arts and Literature: I.M. Pei Maya Lin Amy Tan Deepak Chopra Entertainment and Fashion: Yo Yo Ma Vera Wang Bruce Lee Jackie Chan

13. Growing Influence on U.S. Culture Media and Business Connie Chung Ann Curry Charles Wang Sports: Michelle Kwan Michael Chang Kristi Yamaguchi

14. Hispanic-Americans 35.3 million 1990-2000: 58% growth Source: April 1998, Standard & Poor’s DRI

15. Christina Aguilera Marc Anthony Ricky Martin Enrique Iglesias Gloria Estefan Jimmy Smits Cameron Diaz Andy Garcia Salma Hayek Increasing Influence on U.S. Culture Music: Movies:

16. Increasing on U.S. Culture Influence Sports: Arantxa Sanchez-Vicario Oscar de la Hoya Alex Rodriguez Sergio Garcia Literature: Gabriel Garcia Marquez Isabel Allende Carlos Fuentes Sandra Cisneros

17. Bill Richardson Increasing Influence on U.S. Culture Fashion: Paloma Picasso Oscar de la Renta Carolina Herrera Public Leadership: Mel Martinez Ken Salazar Carlos Gutierrez

18. California Population by Race / Ethnic Distribution Source: Public Policy Institute of California

19. 100 + years 95 to 99 years 90 to 94 years 85 to 89 years 80 to 84 years 75 to 79 years 70 to 74 years 65 to 69 years 60 to 64 years 55 to 59 years 50 to 54 years 45 to 49 years 40 to 44 years 35 to 39 years 30 to 34 years 25 to 29 years 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9 years < 5 years 0 0 0 0 500,000 400,000 300,000 200,000 100,000 100,000 200,000 300,000 400,000 500,000 500,000 400,000 300,000 200,000 100,000 100,000 200,000 300,000 400,000 500,000 Population Pyramids for Anglo and Hispanic Ethnic Groups in Texas, 2000 Anglo Hispanic

20. Minority Populations Are Young % of population under 20 Source: Market Segment Research; Population Report, Middle Series, 1996

21. Minority Households Are Larger Whites Blacks Hispanics Household Size 2.58 2.75 3.54 Source: 1998 Current Population Survey

22. Over 249,000 --31%-- come from Spanish-speaking countries Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99

23. Over 194,000 --24%-- come from Asian countries Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99

24. Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99

25. Source: U.S. Dept of Justice, Immigration and Naturalization Service, Annual Report, Jan 99

26. Myth:“The Minority Market Is Small and Hence Is Not a Significant Factor for Business to Consider.”

27. There Is Still a Significant Gap in the Rate of Home Ownership Home Ownership Rate: Source: Department of Housing and Urban Development – Office of Policy Development & Research, US Housing Market Conditions, 4th Quarter 2001

28. Projected Owner Occupied Household Growth in Millions 2000 - 2010 African Asian/ Total TotalAmericanHispanicOtherMinority 10.9 m. 1.8 m. 2.2 m. 1.0 m. 5.0 m. Source: 1998 Current Population Survey

29. Minorities Account for 41% of All New Homeownership Source: Department of Housing and Urban Development

30. Top 10 Surnames of California Homebuyers Garcia Martinez Smith Lee Lopez Johnson Rodriguez Gonzales Hernandez Williams Source: American Demographics, June 1998

31. Myth:“It Will Be a Long Time Before Minorities Will Be a Viable Middle Class.”

32. Growth of the Middle Class: Hispanic Households Asian Households Total Households African American Households Middle Class Defined: 1989: $23,663 - $36,201 1999: $33,001 - $52,174 Source: U.S. Census Bureau

33. Fact: Minority Families Have More Workers Per Household Households with Three or More Workers, The Middle Class - 5 County Area Source: Pepperdine University Institute for Public Policy “The Emerging Latino Middle Class” 1997

34. America’s Leadership Institutions Must Recognize The Importance Of Diversity

35. I. Generate Investment Returns • Market Opportunities • Minority – driven Growth • Key Industry Impacts

36. Consumer Goods: • food • clothing • children needs • family staples

37. Transportation: • automotive sector • airlines

38. Health Care and Personal Services: • pharmaceuticals • medical services • senior care

39. Housing and Accessories: • real estate • homebuilding • rentals • furniture • household appliances

40. Information and Entertainment: • telecommunications • electronic products • radio and television broadcasting • live entertainment

41. Financial Services: • banking services • investment products • remittances

42. Major Companies are Deciding as Policy and Practice That They Will Creatively Address Diversity • It is a Growth Imperative • Organizational Attitudes Must Reflect That Recognition • Practices & Procedures Must Support It

43. Companies are Developing Appropriate Products and Accessible Services • Calibrate Products to the Market • Refine the Message • Locations: Community Accessibility

44. Companies are Staffing and Training for Diversity • Bilingual Staffing • Training and Orientation on Attitudes and Procedures • Efforts at Cultural Understanding • Entrepreneurial Outreach

45. Companies are Communicating With “Phases of Life” in Mind • Refine and Target the Message • Choose the Most Appropriate Communication Mediums • Address Language • Emphasize Aspirational Content

46. Companies are Investing in Financial Education to Create Economic Opportunity for the Long Run • Educate Minorities About Financial Prerequisites • Stress Credit Record Preparation • Teach, Persuade, Explain

47. Companies are Addressing the Special Needs of Immigrants • Basic Explanatory Materials • Contrast to Systems in Home Countries

48. Companies Recognize that the Time Frame Is Immediate • Performance Objectives • Trends are Accelerating

49. II. The Investment Sector Must Prepare the Infrastructure of the Investment Business

50. 1. Direct rigorous analysis of trends, industry sectors, and positioning