CalSTRS Names Developing Manager Firms for Fixed Income
Managers program extends CalSTRS reach into the marketplace
SACRAMENTO, CA – The California State Teachers’ Retirement System (CalSTRS) today announced its intent to award contracts to three investment management firms that will implement a developing manager program in its fixed income portfolio.
CalSTRS named San Francisco-based Leading Edge Investment Advisors, LLC, as a fund-of-funds manager. The two direct management firms selected were Access Capital Strategies, LLC, of Boston and Community Capital Management, Inc., of Weston, Fla. Dollar amounts have not been established for each contract.
The three firms will be CalSTRS fiduciaries and have discretionary authority over CalSTRS assets with investment mandates focusing on core plus and high yield bond strategies. Their mandates will also include special situations in the mortgage and municipal markets related to housing investments in California.
“These firms will help us find the emerging stars in fixed income and focus on the smaller firms that will add value to the teachers’ retirement portfolio,” said CalSTRS Chief Investment Officer Christopher J. Ailman. “This strategy is part of our commitment to look for value everywhere we can find it to strengthen the financial security of our members and their families.”
CalSTRS defines a developing manager as any investment management firm with less than $2 billion under management.
The Developing Manager Program in fixed income is a new direction for CalSTRS’ oldest asset class, which until 1966 comprised the entire CalSTRS investment portfolio. Fixed income has been steadily shifting assets from an internally managed core strategy into a more active, externally managed opportunistic strategy to diversify the fixed income portfolio and to add value to the core strategy
The first phase of the Opportunistic Portfolio was funded with almost $6 billion going to nine core plus and high yield managers. The Developing Manager Program, the second phase of this opportunistic strategy, will be funded at $300 million to $500 million and is designed to complement the existing lineup of external managers.
In addition to awarding the contracts, CalSTRS used this competitive process to establish a pool of qualified investment management firms that will serve as future additions and replacements for the program. In the pool are the San Francisco-based Progress Investment Management Company, LLC and Third Stage Investment Group, LLC, of Bellevue Wash.
Fixed Income holdings are currently valued at $32.7 billion and are targeted at 20 percent of the CalSTRS investment portfolio.
CalSTRS recently put in place emerging manager programs in two of its other asset classes.
- In February 2008, CalSTRS named four firms to its $1.8 billion U.S. Equities Developing Manager Program.
- One month later, CalSTRS announced a $200 million effort to find private equity partners seeking to raise their first, second or third fund.
Developing managers interested in working with CalSTRS in fixed income can contact:
- Clayton C. Jue, President and CIO of Leading Edge, 415-217-7030.
Established 95 years ago, the California State Teachers’ Retirement System, with a $164 billion portfolio, is the second-largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California’s 813,000 public school educators and their families from the state’s 1,400 school districts, county offices of education and community college districts.