SACRAMENTO, Calif. CalSTRS has made the first move in implementing a new infrastructure portfolio that could top $1 billion and help the pension fund reap excess returns while hedging against inflation.
The $169.2 billion California State Teachers Retirement System, Sacramento, is tiptoeing into infrastructure potentially investing in power lines, bridges, ports and other assets after mulling over the asset class for more than a year.
At the June 4 investment committee meeting, members approved the first draft of the policy for a fixed asset financing portfolio, or infrastructure portfolio, that will begin at $1 billion, but will grow if the initial investments prove successful, according to an agenda item from the meeting.
CalSTRS, like other investors who have recently carved a slot for infrastructure in their portfolios, sees the asset class as a hedge for long-term liabilities, a hedge against inflation and an avenue of diversification for the overall investment portfolio.
Also prompting interest is the expected low returns of the equity markets in coming years, said Alan Biller, president and founder of consulting firm Alan D. Biller & Associates Inc., Menlo Park, Calif.
Only one of the firms 65 clients now invests in infrastructure, but three more plan to make maiden allocations in the next six to nine months, he said. Mr. Biller declined to name his clients.