A planned $200 million investment in a global macro hedge fund strategy might seem small for a giant public pension plan like CalSTRS, but the program it comes from hopes to see big gains from it and other commitments.
The investment is the first to be developed from the $138 billion California State Teachers' Retirement System's innovation and risk unit. The unit was created by Chief Investment Officer Christopher Ailman and approved by system's board in March 2009. Its mission is to research and test innovative investments.
Mr. Ailman said the innovation unit also is studying potential strategies in commodities and microfinance.
The program — which eventually could handle as much as $2 billion — runs contrary to the broad perception of CalSTRS' being a more conservative investor than its neighbor, the $209.1 billion California Public Employees' Retirement System, Sacramento.
West Sacramento-based CalSTRS plans to hire from three to six money managers to implement the new hedge fund strategy by the end of the year, said Mr. Ailman. April 29 was the deadline for consultants to bid for a CalSTRS contract to help the system initiate, monitor and assess the strategy.
The innovation and risk unit has five full-time staffers. Four have backgrounds in finance or money management; one is a clerical position. In addition, an advisory committee consisting of the chief investment officer and directors from other asset classes are assigned to provide oversight regarding investment recommendations and to review the unit's reports.
Along with seeking new investment ideas, the innovation and risk unit allows CalSTRS executives to analyze these potential investments without adding a burden to existing staff.
“The staff in each asset class is very busy managing their respective multibillion-dollar portfolios and is especially busy in this stressful economic period,“ Mr. Ailman said in an interview. “If they have time to research new areas in their asset class universe, they still do (that) as an extension of this team. But the innovation team's goal is to look at ideas that don't fit into the traditional asset boxes or to help perform a deep dive on the ones that might fit into a box.”