Up to one-fourth of the California State Teachers’ Retirement System’s $1.5 billion private equity portfolio could move abroad, according to a new alternative investment plans adopted by the pension fund last Wednesday. More than half of that allocation will go to international buyout funds and the rest will go to venture capital and debt-related investments.
The plan proposed by consultants McKinsey & Co. in February, calls for the pension fund to move into the Far East, Latin America, Eastern Europe and the Middle East to seek new opportunities. According to McKinsey, private equity teams in these regions raised $3.2 billion, or 4% of the worldwide private equity total, in 2002.
Previously, CalSTRS’ international investments had been limited to Canada, the United Kingdom and Western Europe. Those commitments are worth $1.8 billion.
Already, the pension fund is tinkering with its allocations within the private equity universe. Last month, the pension fund’s alternative investments team put $144 million to work in the private equity markets, including a $65 million commitment to two buyout funds, FS Equity Partners V LP and The Blackstone Group’s internationally focused Chemical Coinvest Partners LP.
Cambridge Associates will oversee the pension plan’s Far East and Latin American investments, while Altius Associates will take responsibility for its Eastern European and Middle Eastern portfolios. Both Cambridge Associates and Altius Associates are already two of CalSTRS’ external advisors. Now they’re broadening their mandates.
About 5% of the pension fund’s assets sit in private equity funds. It invests in buyout, venture capital, subordinated debt and secondary funds. CalSTRS manages $116 billion.