CalSTRS OKs secondary activity

CalSTRS may follow in the steps of crosstown rival CalPERS, selling portions of its portfolio through the secondary market. Last month its board approved this – and two other – significant policy changes.

The $170 billion (€126 billion) California State Teachers’ Retirement System recently altered its alternative investment programme policy, enabling it to sell portfolio assets. Previously, the US’ second largest pension fund was only a buyer of private equity secondary interests.

“All of these big portfolios, to my knowledge, were built on the assumption that you buy. And now there’s a clear phenomenon that you can buy and sell and manage your portfolio,” Réal Desrochers, director of CalSTRS Alternative Investments, told sister publication Private Equity International.

According to an advisor to institutional investors, the move by CalSTRS to clarify its ability to sell fund interests on the secondary market is welcome news for participants in that market, and further confirmation of its permanence.

“In the past most of the large [secondary] deals were driven by people looking to exit the market,” the consultant says. “But CalSTRS and CalPERS are more about active management of the portfolio.”

The board of the California Public Employees’ Retirement System, the biggest US pension fund, approved the pension’s ability to sell fund interests through the secondary market eight months ago.

CalSTRS’ July board meeting of its investment committee also saw the Sacramento-based pension approve policy initiatives to co-invest globally, as well as purchase equity stakes in general partnerships.

An in-depth look at CalSTRS’ private equity portfolio, investment strategy and views on current events affecting LPs and GPs will be featured in the October issue of Private Equity International.