California State Teachers Retirement System (CalSTRS) plans to increase its real estate target allocation from the current 13% to 15% and reduce its allocation to public equity.
CalSTRS said in a document ahead of a board meeting this week that the changes will help improve diversification, enhance portfolio down-side protection and take advantage of the risk-return profile of private assets as outlined in the investor’s ”collaborative model” initiative.
Once approved, the changes will enable the $236.9bn ($216.1bn) pension fund reduce its allocation for public equity to 42% from 47% and also increase allocations to inflation-sensitive strategies from 4% to 6% and risk-mitigating strategies from 9% to 10%.
As previously reported, the pension fund generated an 8.2% real estate return over the 12 months to 31 March 2019, outperforming its benchmark by 170bps.
In March this year, CalSTRS increased its real estate target allocation from 12% to 13%.