CalSTRS hires two investment consultants

The California pension fund has adopted a dual-consultant approach regarding investment decisions and has named PCA and Meketa as lead and co-consultant, respectively.

The California State Teachers’ Retirement System (CalSTRS) will seek the opinions of two consultants for its investment decisions going forward, having selected Pension Consulting Alliance (PCA) as lead consultant and Meketa Investment Group as co-consultant, according to a statement.

The decision to hire two consultants instead of one – PCA has been the general investment consultant of CalSTRS' investment committee since 1989 – is “to improve research and provide broader opinions on key investment issues and decisions” CalSTRS said in the statement.

The investment committee selected the two firms from a group of four candidates that had responded to a Request for Proposals (RFP).

“This arrangement provides us with a valuable second opinion on our major investment decisions and policies that guide the management of our $180 billion investment portfolio,” investment committee vice chair Sharon Hendricks said.

Duties between PCA and Meketa will be divided, but both firms will work on the tri-annual asset allocation study “because it is the most important and profound investment decision for the Committee,” the fund’s chief investment officer Christopher Ailman said during a recent board meeting announcing the selection of the two firms.

According to Ailman, lead consultant PCA will be responsible for all the same duties the CalSTRS general consultant has traditionally performed.

Meketa, as co-consultant, will be responsible for participating in two major projects per year and for monitoring and commenting on CalSTRS’ strategic asset allocation. The co-consultant will also be expected to comment at investment committee meetings should the firm have a different or alternative opinion to that of the lead consultant.

The decision comes just two months after CalSTRS simplified its investment policy by allowing investment staff to make investments of up to $300 million without needing the investment committee’s approval.

Founded in 1913 and headquartered in Sacramento, CalSTRS provides retirement-related benefits and services to over 862,000 public school educators.

With $181.1 billion in assets under management as of December 31, 2013, CalSTRS is the second-largest pension fund in the US and the largest teacher-only pension fund in the world.

The fund invests in alternative assets, with around 27 percent of total assets currently allocated to alternatives, including private equity, real estate, and inflation-linked strategies.

The CalSTRS Investment Committee established the infrastructure portfolio with a policy approval in 2008. Staff was dedicated to the programme in 2010.

According to Infrastructure Investor Research & Analytics, 0.54 percent of CalSTRS’ portfolio is invested in infrastructure, while the pension fund’s target allocation for the asset class is one percent.