CalSTRS Plans Shift to Alternative Investments

July 14, 2006 ( - The California State Teachers' Retirement System (CalSTRS) announced a plan to shift $11 billion of investments into high-rises, industrial parks, fast-growing startup companies and other private equity investments.

According to the Sacramento Bee, the plan calls for increasing real estate investments to 11% of assets from 6% and alternative investments to 9% from 6%. Assets in fixed income would drop to 20% from 26%, and US and global stock investments would drop down 1% to 60%.

CalSTRS, with assets of about $140 billion, is adopting the strategy to increase returns. According to the Bee, the fund has a shortfall of $20.3 billion.

Christopher Ailman, CalSTRS chief investment officer, said real estate investments could show a return of more than 30% over the past fiscal year once final numbers have been calculated, according to the newspaper. He expects alternative investments, such as venture capital, will show similar returns. By contrast, the fund projects a 4.75% return for corporate bonds and mortgages.

Ailman said the shift to new investments could take at least six years to be completed.

The CalSTRS move is another in the recent trend of public funds turning to alternative investments to boost returns (See Running the Fund: Spreading Their Wings ).