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CalSTRS sells equities in high-priced markets, returns 8.1% in 2016

CalSTRS has been selling some of its equity assets as stocks reach all-time highs, part of a formal plan to derisk the portfolio but also out of concern that stock prices are too expensive for future investments, Chief Investment Officer Christopher Ailman disclosed to the pension plan's investment committee Wednesday.

Mr. Ailman would not elaborate on the amount of stocks that have been sold in the last several months, but said total equity assets have not declined significantly because of rising prices. The $202.1 billion California State Teachers' Retirement System, West Sacramento, had 58% of its portfolio in equities, for a total of $117 billion, at the end of February.

Mr. Ailman said assets being moved from equities are being placed in the system's risk mitigation portfolio, which now has around $6 billion in assets.

Separately, the pension fund returned 8.1% in the year ended Dec. 31, Allan Emkin, managing director of Pension Consulting Alliance, the plan's co-general consultant, told the investment committee.

The returns contrast starkly with the 1.4% return of the system's fiscal year ended June 30.

The 8.1% calendar year results surpassed the policy benchmark of 8% and the assumed rate of return of 7.5%. The rate of return is scheduled to be lowered to 7.25% effective July 1 and to 7% effective July 1, 2018.