(Adds details about boardroom fight in paragraphs 3-7)

By Svea Herbst-Bayliss

NEW YORK, March 29 (Reuters) - The California Public Employees Retirement System (CalPERS) said on Friday it voted to elect activist investment firm Trian Fund Management's two director candidates to Walt Disney's board, in one of the most closely watched and expensive battles for corporate control.

"CalPERS believes Walt Disney Co will benefit from fresh eyes on its board of directors and voted its company shares in favor of candidates Nelson Peltz and Jay Rasulo," the U.S. pension fund, which owned 6.65 million shares in the entertainment giant at the end of December, told Reuters.

CalPERS, which ranks among Walt Disney's top 30 investors, according to LSEG data, said its "established voting guidelines focus on the need for independent corporate boards, a say in setting executive pay, and increased transparency. Two new directors who are qualified and capable of leading needed change in corporate governance will serve the Disney board well."

Shareholders will decide at next week's annual meeting who will sit on the home of Mickey Mouse's 12-person board and help guide strategy as CEO Bob Iger seeks to transform a company valued at $224 billion.

As more big shareholders are expected to cast votes in the coming days, Disney is racing to convince investors there is no need for new blood on the board at a time when the share price has climbed and Iger has laid out

new initiatives

to cut costs and reignite the company's creative spark.

Trian and another hedge fund, Blackwells Capital, which is trying to win three Disney board seats, are doing the same, telling investors the Disney board has bungled succession planning for Iger, needs to better harness technology, and should consider separating its real estate holdings.

Proxy advisory firm Institutional Shareholder Services (ISS) recommended that investors elect Peltz, while its much smaller rival, Egan-Jones, recommended votes for Peltz and Rasulo, a former Disney chief financial officer who was passed over for the top job at the entertainment company years ago. Glass Lewis, another proxy advisory firm, suggested investors back all of Disney's 12 directors. (Reporting by Svea Herbst-Bayliss; Editing by Paul Simao)