The California State Teachers' Retirement System, West Sacramento, committed $100 million to Principal Real Estate Investors for a U.S. real estate investment trust mandate, said Michelle Mussuto, spokeswoman for the $227.8 billion pension plan in an email.
CalSTRS Director of Real Estate Mike DiRe mentioned the investment during CalSTRS' investment committee Wednesday during a discussion on the collaborative model. The REIT commitment is CalSTRS' first to the sector and unlike CalSTRS collaborative model investments, which are through joint ventures with operating companies and occasional purchases of operating companies, CalSTRS does not have investment control over the Principal Real Estate REIT portfolio.
Separately, the investment committee approved an updated private equity investment policy that includes a new multistrategy sub-asset class and fresh benchmarks for core, now called longer-term strategies, multistrategy and special mandates. CalSTRS previously invested with Principal Real Estate.
Longer-term strategies involves private equity firms holding companies longer in exchange for lower fees and carried interest, which reduces costs — such as transaction fees, capital market expenses and deep corporate intervention — of having to sell a company every four to six years, said Margot Wirth, CalSTRS' private equity director. CalSTRS investment committee adopted a benchmark of the buyout portion of the State Street Global Exchange Private Equity index multiplied by 90%. The benchmark had been a vintage year customized benchmark.
The multistrategy sub-asset class is a combination of investments in private equity with other lower expected return asset classes possibly including fixed income, infrastructure, real estate and liquid strategies. The multistrategy benchmark is a 60/40 blend of the debt-related and buyout portions of the State Street Global Exchange Private Equity index. The benchmark had been an equally weighted, blended benchmark of the MSCI ACWI index, Credit Suisse High Yield index, NCREIF Property index and the HFRX Global Hedge Fund index.
Special mandates are private equity investments in sectors such as rural and urban managers, new and next generation managers and clean-tech/renewable energy managers. The special mandates benchmark is the buyout portion of the State Street Global Exchange Private Equity index minus 200 basis points. The prior benchmark had been a weighted blend of the buyout, venture capital, and debt-related investments customized to reflect the pacing and vintage year of CalSTRS' portfolio.
