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CalSTRS gets OK from board to look for a co-investment adviser

Christopher Ailman, chief investment officer of the California State Teachers’ Retirement System

CalSTRS' board approved hiring a firm that can act as a co-investment adviser, helping the pension fund expand its private equity co-investment program, spokeswoman Michelle Mussuto confirmed in an e-mail.

Co-investments, which the $215.3 billion West Sacramento-based California State Teachers' Retirement System places alongside its limited partner fund investments, make up 5.4% of CalSTRS' $17.3 billion private equity program.

Christopher Ailman, CalSTRS' chief investment officer, has made it a key priority to build the co-investment program. In the past, CalSTRS has been offered additional portfolio company investments by its general partners without additional fees.

In an interview earlier this year, Mr. Ailman said the co-investment adviser would look for additional co-investment opportunities from existing partners but would also be on the lookout for new co-investment relationships, even alongside funds in which CalSTRS does not invest as a limited partner.

The co-investment adviser would also take a stake in the investment.

Ms. Mussuto was not able to immediately provide additional details as to when CalSTRS would be hiring the co-investment adviser and the timetable for expanding the co-investment program.

CalSTRS has $12 billion in commitments that has not been called. Mr. Ailman had said putting more emphasis on co-investments would be a way to increase private equity investment in the current environment.

The approval to hire a co-investment adviser comes as CalSTRS' board and staff and consultants are examining the pension fund's private equity program over the next year as part of a deep dive into ways to revise the program and lower the fees CalSTRS pays.

That review is also looking at whether CalSTRS could engage in direct investments, cutting out fund managers.

Mr. Ailman has said that such a direct investment effort would be on the far end of the investment spectrum for the retirement system and an unlikely scenario, at least in the next few years.