CalSTRS Taking Steps to Reduce Risk
November 11, 2009
Funny how CalSTRS and other pension funds decide now that they want less risk after the market has tanked.
CalSTRS’ new real estate policy creates a higher floor for so-called “core” real estate investment, raising it from 30 percent of assets today to no less than 35 percent. Core real estate is the least risky with minimum vacancy, high-quality tenants and properties and predictable cash flow.
At the same time, CalSTRS is limiting its holdings of higher-risk commercial property to no more than 60 percent of total real estate assets. The value-add and high-return properties would make up no more than 30 percent each under the new plan. The current policy, which tolerates both risk profiles, allows as much as 70 percent of total real estate assets to be in these higher-risk categories.
The system will also pare its exposure to public real estate such as shares in publicly traded and privately held real estate investment trusts, from a maximum of 30 percent to no more than 15 percent of real estate assets. Up to this point, CalSTRS has made very minor investments in public real estate. Through the end of March, they amounted to $32.7 million. This capital is now managed by New York City’s The Fortress Group.
[via The Registry]
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Very informative, I completely agree!