CalSTRS will substantially increase the proportion of assets it manages internally to about 58% of total assets from 45% when it launches a $6 billion international equity fund benchmarked to the MSCI Europe, Australasia and Far East index on its internal trading platform in June, said Christopher J. Ailman, chief investment officer.
Running indexed portfolios in-house is “dirt cheap,” Mr. Ailman said, noting that the cost of managing investment strategies internally is about one-tenth of the fees of its externally managed portfolios.
In other news, Mr. Ailman said a $6.2 billion passive equity fund benchmarked to the Russell 3000 index and managed by BlackRock was terminated in February.
The move is part of the pension fund’s shift of a $16 billion portion of its investment portfolio into a new risk-mitigating strategies portfolio. During a three-year transition, the investment staff of the $186.8 billion California State Teachers’ Retirement System, West Sacramento, will reduce the pension fund’s allocation to equity and fixed income in order to fund the 9% risk-mitigating allocation for investment in hedge funds, other complex hedge fund-like investments, long-duration U.S. Treasuries and other strategies that better protect overall portfolio during market downturns.