CalSTRS Seeks Core Plus and High Yield Bond Managers
Request for proposal deadline April 12
Sacramento, CA – The California State Teachers’ Retirement System today issued a request for proposal to establish a pool of managers for both the High Yield bond and Core Plus mandates. This request for proposal introduces a new mandate for Core Plus managers that will actively manage approximately $4.5 to $6 billion. The High Yield bond manager allocation will remain at its current level of between $1.5 billion and $2.5 billion. The final filing date for proposals is April 12 with selections expected in early summer.
“CalSTRS has historically approached its fixed income asset management fairly conservatively. We believe that a modest increase in the level of active risk within the fixed income portfolio will also provide the potential for greater returns above the benchmark,” said Michelle Cunningham, director of fixed income. “Gradually shifting a portion of the portfolio invested in the Core to Opportunistic active strategies will enable us to better position the portfolio to meet its return objectives.”
At $31 billion, the fixed income asset class represents the second largest asset class in CalSTRS’ portfolio. Currently, all of the investment grade assets are managed internally; high yield assets are managed externally. The firms selected through this competitive process will have full discretion to actively manage their mandates.
This request for proposal is the culmination of a series of presentations that led to the December 2005 CalSTRS Investment Committee decision made to expand the fixed income portfolio’s investable universe from the Lehman Aggregate and High Yield universe. The multi-phased restructuring process will move from the current 95 percent Core/5 percent Opportunistic structure to an 80 percent Core/20 percent Opportunistic structure. Within the Opportunistic strategies portion of the portfolio, a Core Plus allocation was added to the current High Yield allocation.
With a $137 billion investment portfolio, the California State Teachers’ Retirement System is the second-largest public pension fund in the United States. It provides retirement, disability and survivor benefits to California’s 776,000 public school educators from kindergarten through community college.