CalSTRS Receives Investment Industry Innovation Award
CalSTRS receives honors from aiCIO magazine as a large public pension innovator

News release Ricardo Duran

WEST SACRAMENTO, CA – The California State Teachers’ Retirement System today announced that it has received top honors among large public pensions as an investment industry innovator from aiCIO magazine.

CalSTRS emerged the winner in the category of public pensions above $15 billion at the second annual Industry Innovation Awards ceremony on December 1 in New York. The award recognizes innovation, not just for its own sake, but for the greater preservation of capital by acting upon material risks in today’s markets and producing consistent results. The event brought together 150 of the world’s asset owners, consultants, asset managers and asset servicers.

“Chris Ailman, Steven Tong, and CalSTRS are well-deserving of this award. Innovation is at the root of these awards, and the work being done in Sacramento—namely, a rethinking of allocation bucketing, of tail-risk hedging, and with the Innovation Unit as a whole—epitomizes the innovation we at aiCIO like to see in this industry,” said aiCIO Editor-in-Chief Kristopher McDaniel.

“While innovation doesn’t come to mind when you think of large public pensions, the near-death experience of the financial crisis means that the status quo will no longer protect the financial future of California’s public school educators,” said CalSTRS Chief Investment Officer Christopher J. Ailman. “Mitigating risk to protect assets and finding innovative ways to generate returns are today’s mandate, and our staff has more than met the challenge.”

In the past two fiscal years, CalSTRS investment staff have taken steps to protect assets and generate returns such as:

  • Adopting a new asset allocation mix to further diversify the portfolio and reduce its stake in the global stock market.
  • Permanently shifting 5 percent of the portfolio from global equities to create a new asset class that protects against inflation.
  • And launching the Innovations and Risk unit to explore new investment strategies such as macro global hedge funds, commodities and microfinance.

As a result, the CalSTRS investment portfolio posted a 23.1-percent return at the close of the 2010-11 fiscal year. It was the second year of robust returns, following a 12.2-percent return in 2009-10. However, the previous year’s 25-percent decline means the fund cannot invest its way to funding health and requires a long-term funding plan that only the Legislature and Governor have the authority to draft and implement. CalSTRS cannot set its own contribution rates.

The California State Teachers’ Retirement System, with a portfolio valued at $148.2 billion as of October 31, 2011, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of a traditional defined benefit, cash balance and defined contribution plan, as well as disability and survivor benefits. CalSTRS serves California’s 852,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.