CalSTRS investment committee studied using a possible 3% to 6% commodities investment as an “insurance policy” for the $134.1 billion fund, capable of generating double-digit returns if equities were to fall.
The committee tabled the issue until at least April, with members saying they wanted to discuss the issue further.
“Commodities historically exhibited low correlation to equities and bonds and produced double-digit returns when equities fell,” according to a report to the committee by Carrie Lo, investment officer at the California State Teachers’ Retirement System, and Steven Tong, innovation and risk director.
However, the report said, commodities would produce low single-digit returns if equities prices hold.
Ricardo Duran, spokesman for the West Sacramento-based system, said he expects that committee members at their March meeting will discuss appropriate benchmarks for the potential investments, and in April discuss possible commodity investment vehicles.
CalSTRS has been looking at ways to shore up assets, having lost 25% of its money in the state fiscal year ended June 30.
