STRS Ohio selects Callan as its new alternative investments consultant

State Teachers Retirement System of Ohio selected Callan to replace Cliffwater as its alternative investments adviser while still weighing options for its total fund consultant.

In an unusual move, Cliffwater decided to not seek another term as STRS Ohio’s alternative investment consultant after the system filed an RFP last year regarding the position.

STRS Ohio selected Callan over Albourne as its alternative investment consultant at its board meeting held on Thursday, April 20, with two dissenting votes. Buyouts watched a broadcast of this meeting.

Callan’s selection as the system’s private equity consultant is pending a negotiation with the investment staff.

Board members who voted in favor of Callan cited the firm’s experience with STRS Ohio, its work with other large pension systems and breadth of knowledge shown during the interview process, which occurred in investment committee meetings held in March and April.

Albourne was cited by board members for its emphasis on benchmarking and transparency in its presentation. Board members also said Callan’s proposed annual fees were $300,000 less than what Albourne asked.

Cliffwater declined to comment about why it chose not to continue as the $85.9 billion system’s private equity consultant.

STRS Ohio’s board also extended its search for a general fund consultant, a position currently filled by Callan. It expects to name a new general fund consultant at the end of 2023.

Callan was the only firm to respond to an RFP advertising the position, prompting the board to seek more candidates.

STRS Ohio’s CIO Matt Worley said other consultants perceived that Callan had a strong advantage as the current general fund consultant.

Worley said other consultants were leery of working with public pensions, especially as political forces mix with investment decision-making processes.

A board member and person familiar with STRS Ohio activities said controversies surrounding the pension system were the leading reason why the general fund search was extended.

Beneficiaries represented by Ohio Retired Teachers’ Association have frequently criticized the system’s management. Its main complaints include the board’s approval of a staff performance bonus in 2022 despite the general fund’s poor performance, along with issues pertaining to transparency in its alternative investments.

Ohio’s state auditor released a report in January stating the system followed all laws when staff were rewarded bonuses. The same report said STRS Ohio could also could adapt measures to increase transparency around private fund investments.