CalSTRS’ staff plans to conduct an asset allocation study in 2009, according to an agenda item for the June 4 investment committee meeting. The study is done every three years; the last one was conducted in 2006. Also on June 4, staff at the $169.2 billion California State Teachers’ Retirement System, Sacramento, will ask the committee to pick two priorities to include in its work plan for the next fiscal year, which begins July 1. Among the possibilities: internal and external management, domestic and international equity allocations, active and passive investment performance and the inclusion of multiasset-class investments. The work plan will be officially approved by the investment committee at its July 10-11 meeting.
Separately, staff is recommending that CalSTRS drop its ban on tobacco stocks. In 2000, when tobacco was banned, the industry met all four criteria for excluding an industry from its benchmark. That is likely no longer the case, but since some of the risk factors are subjective, it is difficult to say with certainty that tobacco should be banned, according to a staff memo. Only one of the four criteria, the risk of regulatory or legislative actions against the industry, is still present. The ban has cost the pension fund a total of $1 billion in potential gains since it was put in place in fall 2000, according to the memo.
Staff is recommending, though, that health risks be included as part of the pension fund’s environmental, social and governance criteria, shifting the risk of these investments to the money managers instead of the investment committee.
