REAL ESTATE - The California State Teachers Retirement System is taking a look at making infrastructure part of its overall investment strategy, although no formal policy has been established yet.
The fund had an educational session on this investment topic at its investment committee meeting on November 2, presented by Director of Real Estate Mike DiRe and Portfolio Manager for Real Estate Hank Thomas.
It decided that infrastructure investments could be put into a variety of asset classes. Real estate would be one of them. Other possibilities are alternative investments, credit enhancement, public equities and fixed income. CalSTRS has not determined yet where it would put infrastructure.
CalSTRS believes there are good characteristics about investing in infrastructure. They are essential assets for governments, communities and business to operate. This means they are in use, regardless of general economic conditions. They will deliver stable and long-term revenue streams. In some cases they will include an inflation link.
There are many different kinds of examples of infrastructure investments. This would include transportation assets like roads, bridges and airports. Some might be energy services like pipelines, district heating and power generation. There also are government buildings. This would be schools, hospitals or prisons.
CalSTRS has formed an internal task force to take a further look at infrastructure investing. This will cover the five asset classes to review and analyze the opportunity to further assist in the process.
The next step in the investment process is for CalSTRS to select an independent fiduciary. This company will be requested to conduct a thorough due diligence of the entire infrastructure investment universe. Staff and consultants will review these opportunities and present them to the Investment Committee.
Should CalSTRS decide to put infrastructure investments into real estate, it has plenty of capital available for this. The pension fund in September shifted its targeted real estate allocation from 6% to 11%.