CalSTRS picked five managers to run core-plus fixed income and two to run high-yield bonds as part of a restructuring of the fund's $33 billion bond portfolio.
Under the restructuring, the $148.8 billion California State Teachers' Retirement System, Sacramento, is allocating about 15% of its portfolio to core-plus, a new category, while reducing its internally managed core bond portfolio to 80% from 95% of assets. High-yield bonds will remain at 5% of fixed-income assets.
CalSTRS picked Western Asset Management, LM Capital Group, Fidelity Management Trust, Aberdeen Asset Management, and Julius Baer Investment Management to run a total of $5 billion in core-plus portfolios. Breakouts were not available.
The fund also selected BlackRock and Goldman Sachs Asset Management to run high-yield bond portfolios of undisclosed size. Last year, CalSTRS had reduced high-yield bond portfolios run by Capital Guardian Trust and Hartford Investment Management of $393 million and $470 million, respectively, to negligible amounts. CIO Christopher Ailman explained that CalSTRS no longer terminates managers, but shrinks their portfolios to keep their contracts active.
CalSTRS also created pre-approved lists of backup core-plus and high-yield bond managers to draw from in case fund officials need to find substitutes or add new managers. For core-plus, CalSTRS picked TCW, PIMCO, Delaware Investments, Lehman Brothers Asset Management, Brown Brothers Harriman and Putnam Investments. For high yield, the fund selected Nomura Corporate Research and Asset Management, Wells Capital Management, Metropolitan West Asset Management, E.H. Williams Capital Management and Lehman Brothers.