Separately, CalSTRS and consultant McKinsey & Co. recommended the fund boost its buyout allocation to 70% from 60% of the fund's $6.4 billion private equity portfolio, while trimming the fund's venture capital allocation to 15% from 25%. The shift is recommended because the buyout sector is growing faster than the venture capital sector, a staff memo explained.
In addition, staff of the The $123.5 billion California State Teachers' Retirement System, Sacramento, recommended the fund's alternatives benchmark be lowered to the Russell 3000 index plus 300 basis points, cutting the target return by 200 basis points. Staff said the change is consistent with assumptions made by other pension funds.
Staff also recommended increasing the amounts that they can commit to private equity funds without getting board approval. For new manager funds, staff would be able to commit the lesser of $250 million or 15% of the total fund size, up from $100 million or 20% of fund size. For follow-on funds, staff could commit the lesser of $500 million or 15% of fund size, up from $500 million or 20% of fund size.