CalSTRS expects to search for a permanent consultant to assist with manager sourcing and selection for its $20.6 billion risk-mitigating-strategies portfolio in fiscal year 2020, according to new business plans adopted by the $226.1 billion pension plan's board.
West Sacramento-based California State Teachers' Retirement System is currently in the midst of selecting an interim consultant, the plans note. Risk mitigating staff will also research new managers for potential mandates across all sub-strategies in fiscal year 2020 and will continue to research other strategies consistent with the risk-mitigating-strategies portfolio's mandate of positive returns and downside protection.
Long-term goals for the risk-mitigating-strategies portfolio include possible co-investments with global macro managers for investments that they cannot implement in their flagship funds, investments in liquid, index-based strategies such as trend following offered by investment banks to avoid external management fees and take advantage of banks' execution capabilities, invest seed capital in new managers and develop investment strategies in-house.
CalSTRS' theme for fiscal year 2020 across all asset classes is to implement its collaborative model, which involves fewer assets invested in traditional partnerships and account structures, and more money invested in collaborative vehicles to lower costs and increase oversight. CalSTRS' cost is about 84 basis points, with more than half of the cost coming from partnerships, 40% from external managers and services, and 14% spent on internal staff.
CalSTRS' $107.8 billion global equity fiscal year 2020 plan includes expanding its internal asset management capabilities.
In the long term, both global equities and fixed income might manage assets of CalSTRS' voluntary deferred compensation program, the plans show.
Staff of CalSTRS' $6.9 billion sustainable investing and stewardship strategies expect to explore new co-investment and strategic engagement opportunities with activist manager and integrate CalSTRS' ESG policies across asset classes. In the long-term, CalSTRS could seed and incubate new sustainability-linked strategies.
In private equity, CalSTRS is looking to significantly increase its co-investments in its $20.1 billion private equity portfolio over the next several years, assuming high-quality investment opportunities exist.
In real estate, CalSTRS officials plan to seek out opportunities to invest in joint ventures with other asset owners to invest in large, complex transactions. CalSTRS is also looking to expand its holdings in strategic real estate operating companies. Currently, $25.6 billion, accounting for 83% of the pension plan's $32.2 billion real estate portfolio, is internally managed in joint ventures, separate accounts and open-end funds, with the remainder in non-control positions in commingled funds and co-investments.