CalSTRS plans infrastructure hiring spree

The $132bn pension plans on hiring additional investment staff, a consultant, legal counsel and ‘independent’ fund managers to help it fulfill its ambition of becoming a ‘world class infrastructure investor’, according to a business plan. The pension has up to $3.5bn to invest in the asset class.

The California State Teachers' Retirement System, the second largest public pension plan in the US, is planning to hire investment officers, a consultant, legal counsel and “independent fiduciaries” to help it grow its brand new infrastructure portfolio, according to a business plan published this week.

The business plan, slated for discussion today at the $132 billion pension, envisions building up a $3 billion to $3.5 billion infrastructure portfolio, or 2.5 percent of CalSTRS’ total assets.

To help reach that goal, CalSTRS said it is looking to hire legal counsel as well as “a general infrastructure consultant” who will work with its infrastructure portfolio manager, Diloshini Seneviratne, and chief investment officer, Chris Ailman. The team will also add on two investment officers, a staff services analyst and an administrative assistant, according to a flowchart of the infrastructure group’s planned expansion.

Currently, Seneviratne, who came over from the pension’s private equity arm to start up the infrastructure portfolio in February, is the only member of the infrastructure team. To date, she has been busy formulating the portfolio construction plan for the programme, according to the business plan.

The programme “will be focused on stable, long-term cash yielding investments with the top investors in the world” CalSTRS said. The programme will also “evolve in several ways”, meaning that the pension won’t pursue solely fund investments. Rather, it will also seek exposure to infrastructure assets via co-investments, direct investments, consortiums and joint ventures.

For the fund managers that it does hire, though, independence is likely to be an important factor, as the pension said it is looking to hire “independent fiduciaries with niche infrastructure expertise”, such as project finance or engineering.

Other infrastructure portfolio preferences will include an initial focus on both the US and members of the Organization for Economic Cooperation and Development, such as Australia, the UK and much of Western Europe. However, CalSTRS will also allow for “some emerging market exposure”.

The pension will also “prioritise investments in the clean and alternative energy markets” as well as in the California market.

CalSTRS’ ultimate ambition is to “gain status as a world class infrastructure investor”, according to the business plan, which aims to add “$10 billion in profits from the financial markets, and add an extra $1 billion of return above the market” across all of CalSTRS’ asset classes.