CalSTRS may search for three to four core-plus fixed-income managers to run up to $6 billion in total assets if a proposed overhaul of its fixed-income policy is approved by the board at its Dec. 7 meeting, a staff memo said.
Staff at the $135 billion California State Teachers' Retirement System, Sacramento, recommended shifting the fund's $31 billion fixed-income portfolio to a 80% core and 20% opportunistic target over the next year, from the current 94% core and 6% opportunistic exposure. Currently, CalSTRS' opportunistic fixed-income investments are only in high-yield bonds. Staff, supported by Pension Consulting Alliance, proposed investing 15% to 20% of fixed-income assets in core-plus portfolios, which can include exposures to high-yield, non-dollar and emerging-market debt.
CalSTRS may also hire up to two additional staff members to oversee the new structure, one to manage a new risk management system and another to oversee opportunistic managers. CalSTRS is also close to issuing an RFP for a fixed-income portfolio and risk management system; staff hopes to have a new platform in place by spring, the memo said.
Separately, the system is undertaking an asset-liability study to solicit board members' priorities in risk tolerance. Pension Consulting Alliance and EFI Actuaries will conduct the study, and actuary Milliman Global will assist; it is expected to be finished in July.
The system had a target asset mix of 38% U.S. equities, 26% fixed income, 20% international stocks, 8% private equity, 7% real estate and 1% cash as of Oct. 31. The fund's actual asset mix is 43% domestic stocks, 24% bonds, 22% foreign stocks, 5% each for private equity and real estate, and 1% cash.
