CalSTRS officials could release an RFP for a private equity consultant in early summer of 2019 should the investment committee approve a two-year extension for incumbent Meketa Investment Group, according to agenda materials for the committee's July 20 meeting.
The staff at the $224.9 billion, West Sacramento-based pension fund is proposing a two-year extension of Meketa's contract, which is due to expire Sept. 30. The California State Teachers' Retirement System typically conducts a nationwide search for investment consultants after five years of service. Meketa's contract gives CalSTRS the option to extend the contract for one year or two years. Choosing a two-year extension gives CalSTRS time to conduct a search, which generally takes one year, without the need of returning to the board for another extension next year, the agenda materials said.
Separately, CalSTRS could launch an asset-liability study as early as January if the board at its July 19 meeting approves the investment committee's work plan. In preparation for the asset-liability study, the staff and consultant Pension Consulting Alliance are asking the investment committee to revise its asset allocation process as part of proposed overall investment policy changes. The proposed revisions would broaden the matters to be considered during the asset allocation/asset-liability decision-making process. The investment policy proposal, if adopted, would also lengthen the cycle so asset-liability studies would be done every four years rather than every three years.
As part of the revisions to the investment policy, which has not been changed other than minor tweaks since it was adopted in 2001, the staff and PCA are also recommending changes to CalSTRS' California investment policy. The original goal of the policy was to encourage investment in underserved urban and rural areas in California. CalSTRS committed more than $5 billion to in-state private equity and real estate under the policy. However, "the vast majority of those investments failed to achieve an adequate return and failed to meet the goal of improving underserved portion of the state," a staff memo for the investment committee's July 20 meeting said. CalSTRS dropped the original goal in favor of a California preference when possible.
Also at the upcoming meeting, the investment committee will discuss how a collaborative approach to investing, which includes direct investments, can be applied to real estate.
The committee will also discuss a report on the results of a new proxy voting policy adopted in November. Under the new policy, CalSTRS will vote against members of a corporation's nominating and corporate governance committees, and if necessary the entire board, if after speaking with company executives about lack of board diversity, CalSTRS staff does not feel enough progress had been made.
The policy was adopted in response to a November proposal by California Treasurer John Chiang, a CalSTRS board member, that a corporate board be defined as diverse if at least 30% of its members are women and another 30% are diverse in terms of sexual orientation, and cultural and ethnic composition. The report revealed that between Nov. 1 and June 6, CalSTRS had engaged with a total of 281 companies, separately or as part of a coalition, and had withheld votes against 281 directors.