CalSTRS Selects a Private Equity Consultant
Pension Consulting Alliance will provide assessments of the portfolio's performance
WEST SACRAMENTO, CA – The California State Teachers’ Retirement Board, the governing body of CalSTRS, today announced the selection of Pension Consulting Alliance as the private equity consultant to its Investment Committee for the next five years.
PCA will provide independent assessments of the private equity portfolio’s performance.
PCA will also prepare the semi-annual performance reports and review the annual business plans. The firm will review, comment and make independent recommendations on investment strategies, policies and practices of the private equity program. PCA will also provide independent, objective analysis of proposed investments.
PCA is an employee-owned Portland, Ore. firm founded in 1988 and chartered in Delaware. The firm’s sole line of business is investment consulting and client advocacy, retaining only nondiscretionary relationships with clients. Among PCA’s 29 consulting clients are public and private pension systems, university savings plans, endowments and Taft-Hartley funds. PCA has offices in New York City; and in Los Angeles, San Diego, Sacramento and Carmel, Calif.
CalSTRS has established a best-practices standard in the separation of duties among consultants to create an environment of objectivity and clarity of responsibilities. This means that the consultative function has been divided into three broad areas with the private equity consultant, PCA, handling the broader assessment and analysis function.
The other two functions are:
- Gate-keeping – performing due diligence on prospective partners and making investment recommendations. This function is carried by two firms, Altius Associates and Cambridge Associates.
- Record keeping – providing benchmarking and performance measurement services. This function is performed by the firm, Private Edge Group.
The CalSTRS Private Equity portfolio was valued at $22 billion or 14.4 percent of the overall investment portfolio, as of March 31, 2012.
Since its formation in 1988, the private equity program has earned a net internal rate of return of 13.4 percent, beating its custom benchmark by 430 basis points in that time. The portfolio is made up of 301 active investments involving 117 firms as of September 30, 2011, the latest measure available.
The California State Teachers’ Retirement System, with a portfolio valued at $153 billion as of March 31, 2012, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans, as well as disability and survivor benefits. CalSTRS serves California’s 856,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.