P.E. Boosts CalSTRS As Pension Boosts Hedge Funds

Jul 21 2010 | 10:40am ET

Following a dismal fiscal year 2009, the California State Teachers’ Retirement System turned to alternative investments, and the nation’s second-largest public pension fund was not disappointed.

The plan enjoyed a 12.3% return in the year ended June 30, buoyed by a 21.7% return in its private equity portfolio, which accounts for 14.5% of CalSTRS’ $129.8 billion in assets.

CalSTRS tumbled some 25% in its last fiscal year. It then decided to temporarily move 10% of its assets out of global equities, with 5% temporarily going to a new portfolio of fixed-income, private equity and real-estate, and the other 5% permanently going to a new hedge fund investment plan.

The pension has also created a new unit to investigate new investment strategies, including global macro hedge funds and commodities.

“We’ve taken steps to position the portfolio for long-term growth, but we’re not out of the woods yet,” Christopher Ailman, chief investment officer, said. “The American economy suffered a near-death experience in 2008, and it’s going to take some time to fully recuperate from that. This year’s performance is a solid start along that road to recovery.”


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