UNITED STATES - California State Teachers Retirement System (CalSTRS) is in the process of making some changes to its real estate investment policy which could reduce its investment in core strategies, in favour of higher-returning investments.
The first proposals for change were discussion by the investment committee at a recent meeting and any changes could be approved by February 2010.
CalSTRS believes that the changes should help it to hit return targets but at the same time take the least amount of risk necessary to most consistently meet expectations.
The fund's current investment policy - which has been in place since July 2007 - is to invest 30-70% in core and tactical assets along with between up to 30% public real estate.
However, a shift in strategy is likely to mean that core and public sector targets could be altered, while tactical strategies should be scrapped and replaced with value-added and high-returning investments.
Core assets are likely to be reduced to a 35% target, according to officials, while the new strategies would have a target range of 15-30% of the real estate portfolio. The public real estate allocation would therefore be reduced to up to 15% of the specialist portfolio.
Officials believe the move should give the pension fund a prudent level of risk with a return to beat is benchmark: the NCREIF Property Index.
CalSTRS has so far invested very little in public real estate: just $32.7m (€21.8m) to the end of March 2009 with The Fortress Group.
But the pension fund had invested $12.7bn in real estate by the end of September 2009.