CalSTRS poised to expand overseas

The California State Teachers’ Retirement System is poised to become the first U.S. public pension fund to open an office abroad as it seeks to expand worldwide and enter new asset classes.

Aside from sending more commitments overseas, the LP’s program will likely evolve in other ways, including becoming a larger investor in the clean and alternative energy markets, launching investments in commodities and establishing offices in Europe and Asia. In addition, CalSTRS is looking to hire 10 new investment professionals in the coming years.

No other U.S. pension fund, including California Public Employees’ Retirement System, is believed to have offices abroad.

“We’re hoping to do that in partnership with other institutional investors,” said Real Desrochers, director of private equity, in a statement prepared for Buyouts, an affiliated PE Week publication. “We’re looking four to five years down the road … and CalSTRS is far from any definite decisions.”

The idea is to have staff on the ground in places where CalSTRS is interested in developing partnerships. These staffers can read the local investment climate to have a better sense of what is likely to develop into a fruitful partnership for the private equity portfolio. “Doing this can provide an added dimension to our comprehensive due diligence practices in vetting and approving PE partnerships,” said Desrochers. CalPERS may, over time, become a partner in this initiative.

Based on its projections, the market value of CalSTRS’s private equity holdings will reach $34 billion, or 15%, of the pension fund’s total portfolio by 2012. The state pension fund now has a 10% allocation to private equity.

The Alternative Investment unit, which will soon be renamed the Private Equity unit, plans to maintain its core strategy of concentrated commitments to top-performing managers, along with direct investments in general partner management companies and co-investments in portfolio companies. While the core of the portfolio will continue to be the United States and developed European markets, CalSTRS expects to selectively invest in other countries, including emerging markets. —Nancy Gordon