CalSTRS will issue an RFP, probably in the fourth quarter, for active currency overlay managers to run between 15% and 20% of the fund's $32.5 billion in international exposure. Assets would come from an internally managed currency program, which now runs half of the pension fund's currency exposure.
Currently, the fund only hedges its foreign exposure against a rising dollar, but a new policy approved Wednesday would enable a portion of the currency portfolio to be invested in alpha-generating strategies. The move is expected to generate up to 20 basis points a year in additional returns net of fees. Callan Associates is the consultant.
The $142 billion California State Teachers' Retirement System, Sacramento, will actively engage management of companies with ties to the Sudanese government. If portfolio companies fail to comply with the fund's 20 risk factors, CalSTRS will direct its active managers to find suitable alternate investments that wouldn't impair returns or add risk to the portfolio. CalSTRS' passive portfolios will stop buying shares of companies that violate pension fund policy.
A bill now before the California Legislature would require CalSTRS and the $204.4 billion California Public Employees' Retirement System, also of Sacramento, to engage companies with ties to the Sudanese government. If companies fail to meet legislative criteria, divestment would occur no sooner than January 2009.