Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. PENSION FUNDS
March 28, 2019 01:00 AM

CalSTRS rejiggers asset allocation to mirror long-term targets

Arleen Jacobius
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    CalSTRS CIO Christopher Ailman

    CalSTRS' investment committee decided move its asset allocation closer to its long-term asset allocation targets adopted in 2015, during its meeting Thursday.

    CalSTRS will increase its target allocation to inflation-sensitive assets, private equity and real estate by 1 percentage point each to 3%, 9% and 13%, respectively. CalSTRS will cut its global equity allocation by 3 percentage points to 51%.

    The rest of the target allocations for the $226.5 billion California State Teachers' Retirement System, West Sacramento, will remain the same: 13% fixed income, 9% risk-mitigating strategies, 2% cash liquidity and zero to innovative strategies.

    CalSTRS' CIO Christopher Ailman explained that the investment policy and management plan plots a course toward the strategic asset allocation the board adopted in 2015.

    "We plot a rough course and we know it will change," Mr. Ailman told the investment committee. "We don't do it by the calendar because investments don't follow a calendar ... We want to do it by opportunity."

    He noted that the asset allocation changes adopted by the board are small because the targets will move up or down when the board adopts new long-term asset allocation in November.

    In other action, the investment committee delayed a decision on whether to adopt a risk budget so that investment committee could continue studying and learning about the topic, investment committee Chairman Harry M. Kelley said at the meeting, summarizing statements made by board members during their discussion. A risk budget is a new strategy for CalSTRS that would set a limit of risk staff should take in implementing the strategic asset allocation set by the board.

    During the meeting, Allan Emkin, managing principal of Meketa Investment Group, CalSTRS' general investment consultant, said that creating a risk budget is a "best practice" that is being adopted by boards of other asset owners that have the resources to implement them. Implementation of a risk budget takes one to two years, a staff report to the investment committee estimated.

    If the board continues with static allocation targets, the board runs the risk of outperforming the pension fund's benchmarks.

    "By adopting a risk budget, you delegate responsibility to the staff ... I believe it is a legitimate delegation," Mr. Emkin said. "You are making that decision now and you don't realize you are making that decision."

    Investment committee members would like to know what a risk budget would mean for each of the asset classes, as well as the risks and shortcomings of adopting a risk budget.

    "What do the naysayers say?" Mr. Kelley asked.

    Separately, Mr. Kelley suggested that when the investment committee considers its next two-year work plan in May that it include the impact of a transition to a low carbon economy will mean to each asset class.

    Mr. Kelley made the suggestion after the investment committee had discussed this year's Green Initiative Task Force report. The task force was set up in 2007 to address global environmental issues and to identify, analyze and propose potential investment and risk control strategies related to climate change.

    Among the initiatives for fiscal year 2019, CalSTRS officials will execute the second phase of the CalSTRS' $2.5 billion Low-Carbon index, a low carbon public equities index, the report noted. This phase will include an additional $1.2 billion investment in non-U.S. developed markets and emerging markets, with $200 million invested in emerging markets, the report said.

    In the initial implementation of the CalSTRS Low-Carbon index on July 1, 2017, pension officials made a $1.3 billion investment in the U.S. market.

    The Low-Carbon index is managed internally and returned 14.79% in its first year of performance, during fiscal year 2018, outperforming its benchmark by 4 basis points.

    Related Articles
    CalSTRS to launch asset-liability study
    CalSTRS votes to oppose statewide ban on public funds' investments in private p…
    CalPERS' investment committee backs concept of creating outside entities for pr…
    CalSTRS commits $4 billion in second half of 2018
    Hydralis seeks fixed-income, equity, real estate managers
    CalSTRS taps Meketa as investment consultant
    Danvers Contributory Retirement seeks domestic core bond manager
    CalSTRS on lookout for private equity investment consultants
    Japan's GPIF expands ESG focus with World Bank green bonds
    CalSTRS' investment committee to study implications of low-carbon economy
    CalSTRS commits $100 million to REITs
    Recommended for You
    Santa_Barbara_i.jpg
    Santa Barbara County drops Mellon Investments
    ONLINE_190219921_AR_0_WUDPFXFSZFFK.jpg
    Milliman: Public pension plans' funding dips slightly in May
    XPS Pension Group taps Mercer adviser for risk settlement position
    Emerging Markets: A Selective Approach
    Sponsored Content: Emerging Markets: A Selective Approach

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit