Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Innovation Investing Conference
    • 2022 Defined Contribution East Conference
    • 2022 ESG Investing Conference
    • 2022 DC Investment Lineup Conference
    • 2022 Alternatives Investing Conference
Breadcrumb
  1. Home
  2. Print
November 12, 2001 12:00 AM

UNBUNDLED ROLES: CalSTRS alternative investing consultant duties separated

In a rare move, pension fund divides gatekeeper and strategist functions

Joel Chernoff
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    SACRAMENTO, Calif. - The California State Teachers' Retirement System has split the role of alternative investment consultant into separate strategist and gatekeeper duties.

    By unbundling the roles, officials at the $95.5 billion pension fund seek to avoid having the consultant review its own performance. Currently, Pathway Capital Management LLC, Irvine, Calif., performs both roles for CalSTRS. The division of duties will better align the interests of the consultants, the board and the staff, Christopher J. Ailman, CalSTRS' chief investment officer, told the investment committee last week, according to spokeswoman Sherry Reser.

    Dividing the job between two external consultants is unusual if not unique among pension funds.

    The $144 billion California Public Employees' Retirement System, Sacramento, has shifted the gatekeeping function to internal staff over time, turning to a pool of nine or 10 expert firms when it needs to conduct due diligence. Monitoring functions are provided by Pacific Corporate Group, La Jolla, Calif., and Hamilton Lane Advisors, Philadelphia, which also are in the pool.

    Other pension funds are concerned about giving the consultant discretionary authority to select managers. Officials at the $52 billion Public Employees Retirement System of Ohio, Columbus, currently seeking a private equity consultant, are pondering how large a role in manager selection the fund will give to a private equity consultant (Pensions & Investments, Oct. 29).

    According to a CalSTRS staff memo to the investment committee, the fund needs to split the consultant's role to address the burgeoning size of the retirement system's alternative investments program. The CalSTRS board last month approved increasing the fund's allocation to alternatives to 8% of total assets from 5%, to be implemented over the next four years.

    The fund has $4.6 billion invested in the asset class, but projected growth of the total fund to $150 billion in 2006 means alternative investments actually would nearly triple, to $12 billion, according to CalSTRS projections.

    "While the current AI Advisor/Consultant structure has served CalSTRS well in the past, it is important that CalSTRS structure its governance with the best practices as the portfolio moves into the future. Our structure is good, but it can be made better," said the staff memo.

    As a result, the investment committee on Nov. 8 voted to issue two requests for proposals. Both RFPs are expected to be issued in December, with proposals due in February.

    Finalist interviews likely will occur in March.

    Under the new structure, the alternative investments consultant would help the investment committee develop strategy, analyze market trends and monitor investments, and report back to the committee on a regular basis.

    The program adviser would recommend partnerships for investment, conduct due diligence and analysis, and monitor partnerships.

    Also, CalSTRS will seek legal services on a bundled and unbundled basis in the adviser contract. Currently, legal services are provided indirectly through the adviser, but the CalSTRS investment office expects to obtain more customized legal representation if the services are bundled. More information, however, is required before fund officials make a decision on this issue.

    Outsiders lauded CalSTRS' initiative.

    "No one really has gone out and pitched for a strategic consultant before, so we haven't had a chance to do that. It makes a lot of sense," said Gary Robertson, head of private markets at Callan Associates, San Francisco.

    Chris Bower, chief executive officer and founder of consultant the Pacific Corporate Group, said he thinks the division will "lead to greater transparency."

    Mr. Bower said his firm, which numbers both CalSTRS and CalPERS among its clients, has resolved the issue of independent verification of results by having its performance data audited by a Big Four accounting firm.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    OCIO, Anchor in Rough Seas
    Sponsored Content: OCIO, Anchor in Rough Seas

    Reader Poll

    May 23, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Crossroads: Politics, Inflation, & Bonds
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Q2 2022 Credit Outlook: Carry On
    Leverage does not equal risk
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    May 23, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Innovation Investing Conference
      • 2022 Defined Contribution East Conference
      • 2022 ESG Investing Conference
      • 2022 DC Investment Lineup Conference
      • 2022 Alternatives Investing Conference