CalSTRS is moving closer to revamping its currency management program, in a shift that could lead to hiring external currency managers.
Staff and consultants Callan Associates and Pension Consulting Alliance are recommending that the $140 billion California State Teachers' Retirement System, Sacramento, hedge foreign currencies instead of just the U.S. dollar so the fund can add value when the dollar is appreciating. Currently, the fund only hedges against the dollar's decline.
Also recommended was delegating to staff the ability to manage the non-U.S. dollar exposure for the fund's roughly $15 billion in active international equities, instead of leaving this job to external managers; currently, internal staff hedges dollar exposure for the fund's $15 billion in passively managed foreign stocks. Also, staff recommended adding external currency managers and permitting cross-hedging.
If the board approves the recommendations, staff will come back with proposed policy changes at the board's April meeting.
Separately, the fund committed $350 million to Beacon Capital Strategic Partners IV, a real estate fund that will invest in U.S. and European office buildings. It also committed $70 million to Paladin Realty Latin American Investors II, which will invest in affordable and middle-income housing projects in Latin America.
CalSTRS also committed $100 million to the Starwood SDL HospitalityCo-investment Fund, which invested in Starwood's July 2005 acquisition of Societe du Louvrea large European hotel network, and the hotel network's parent company, Groupe Taittinger.
In addition, CalSTRS increased its equity allocation to Center Cal, a retail property joint venture between Center Oak Properties and the pension fund, to $350 million from $100 million.