CalSTRS could issue an RFP for sustainability managers sometime later this year, Anne Sheehan, director of corporate governance, reported to the investment subcommittee of the $186.8 billion pension fund Thursday.
CalSTRS officials are considering launching the search to test the market. Currently, the California State Teachers' Retirement System, West Sacramento, has two managers running active sustainability portfolios: roughly $700 million managed by Generation Investment Management and $200 million managed by AGF Management.
CalSTRS officials are very early in the process, Ms. Sheehan said.
Separately, the subcommittee plans to send to the full investment committee for its June meeting a first-ever investment policy delineating procedures for investing in special mandates, categorizing by asset class and monitoring special mandates. Special mandates include environmental, social and/or governance investments, in-state investments or investments benefiting the pension fund's participants, according to a first draft of the policy reviewed by the subcommittee.
Once the investment policy statement is adopted by the full investment committee, subcommittee member Thomas Unterman suggested CalSTRS officials consider moving about $2.5 billion of actively managed assets to a group of passively managed special mandates. Mr. Unterman, founding partner of venture capital firm Rustic Canyon Partners, is also a member of CalSTRS' investment committee.
It would be up to the staff to flesh out the recommendation and bring it to the investment committee for consideration, Mr. Unterman said.
Special mandates are not new for CalSTRS, CIO Christopher Ailman told the subcommittee. Often these mandates have sprung from ideas from board members, but until now these mandates have not been analyzed as a group.
Examples of CalSTRS' special mandates are a $200 million private equity commitment made in February 2002 for underserved urban and rural California; a $600 million developing manager program as part of global equities in March 2003; and a $700 million corporate governance activists mandate in global equities, also in March 2003, according to subcommittee agenda materials.
In another report, June Kim, director of global equities, said CalSTRS officials are in the process of bringing $6 billion to $7 billion of non-U.S. equities to be managed in-house.
Few U.S. pension funds manage non-U.S. assets in-house, Mr. Ailman told the subcommittee.
The subcommittee also had an education session with executives from Goldman Sachs Asset Management on passively managed and active beta, low-carbon, large-cap equity strategies. In December, the $178.3 billion New York State Common Retirement Fund, Albany, hired GSAM for a $2 billion passively managed large-cap, low-carbon separate account. So far, GSAM does not have clients invested in the low-carbon active beta equity strategy, according to a presentation to the subcommittee.