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CalSTRS to increase holdings in core assets

The $154bn pension system will also work to decrease holdings in opportunistic and value-add investments and reduce leverage in the portfolio.

The California State Teachers’ Retirement System will work over the next 12 months to increase its holdings in core assets and reduce its opportunistic and value-add investments, according to the pension’s fiscal 2011-2012 business plan. 

“We have been actively pursuing core industrial and retail and been very selective in considering new office product. The most significant market shift in our industry has been a high demand for investments in core assets. This has been driving up asking prices for core product to a level where we are concerned some markets have a mini-bubble in pricing,” according to pension documents. 

“We continue to bid on these assets but are striving to stay disciplined and avoid overpaying in the near term to achieve our long-term objectives,” the pension said of its $18.7 billion real estate programme. 

CalSTRS will likely complete its selection of core managers this summer to “both purchase core assets through separate account relationships and oversee joint venture partner relationships for both core and value-add strategies”, the pension said in documents. 

Once the managers are chosen, the pension also will issue an RFP to “replenish the pool of independent fiduciaries …to opine on new investment opportunities and relationships”. 

The pension is also exploring creating a “master line of credit” for use by its joint venture partners, to replace individual lines of credit formed with each joint venture, helping to lower leverage in the portfolio.

The $154 billion pension’s board will review the business plan Monday. The system also has separate plans to improve its private equity and infrastructure co-investment programmes.