(Dow Jones) -- Calpers and Calstrs, the two biggest US pension funds, will be forced to sell off huge shareholdings in energy companies if the firms don't stop doing business in Iran after a new California law took effect over the weekend, fund officials told Dow Jones Newswires.

California governor Arnold Schwarzenegger signed a measure on Sunday known as the California Public Divest from Iran Act, which bans the two California-based giant funds from holding public employee retirement funds in companies with operations in the Islamic Republic.