The California State Teachers’ Retirement System (CalSTRS) investment committee has voted to make a subtle shift in the long-term asset allocation targets of its US$170-billion investment portfolio.
The decision caps an exhaustive year-long asset and liability study, which examined the risk and return profiles affecting the investment portfolio.
“These are studies we conduct every three years, and this was a critically important one, examining the effectiveness of our response to the global financial crisis of 2008/09,” said CalSTRS investment committee vice-chair Sharon Hendricks.
The new asset allocation reduces the largest asset classes, such as fixed income to 16% from 20% and global equity to 51% from 53%. The illiquid asset classes, consisting of real estate and private equity, saw their allocation edge upward by one percentage point to 13% each.
The investment committee set a long-term target of 6% for the inflation sensitive asset class but will not chase that target. It directed staff to instead allocate opportunistically. While inflation is very low today, the CalSTRS investment committee wants to build in protection for the future.
Full plans for implementing the new asset allocation will be developed in the coming months and will take at least another three years to execute.
Related articles: