The Ledger
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Divestment Fails to Bring About Social Change
“We have proven time and again for the last 20 years that divestment does not bring about any social change, and people have to realize boycotts are generally ineffective unless you can get everybody Involved in them.”
CalSTRS Hires Money Managers Using State Cement Procurement Rules
“But frankly, it takes me almost nine months to hire a money manager. Because of the procurement rules, I have to use the same rules that Caltrans uses to buy cement, or somebody else buys equipment. I have to use that to hire money managers. They don't recogni…”
Later Baby Boomers With 401(k)s Risk Retiring Into Poverty
“And we're going to see a crisis of people, the ladder into the baby boomer pulling out on their four one K and retiring into poverty.”
CalSTRS Runs Internal Strategies at One-Tenth the Cost of Wall Street
“Frankly, we can run money at one-tenth the cost of hiring somebody here on Wall Street to do the same thing”
Management Fees Have Eaten Up Almost All Active Strategy Alpha
“When you look at it, the cost has eaten up almost all of the alpha inactive strategies.”
A 2008-Scale Market Crash Is a 60-to-70-Year Event
“We spent a lot of time really studying 2008. We thought it was a one, 1.5% likely occurrence, and realized that, you know what, in this day and age, it's probably closer to a four percent occurrence. And for the listeners, that's in essence, instead of a hundr…”
Private Equity Premium Over Public Markets Compressed to 150 Bps
“Back when I started in private equity in the nineties, you could get 500 over the public markets. Then it narrowed to about 300. And now the debate today is at one 50 net of cost.”
Private Equity Vintages From 2015 to 2019 May Underperform
“Recognize that probably the 2015, 1617, 18, maybe even the 19 vintage year may not be great returns because the price multiple is so high.”
Indexing Private Equity Across Hundreds of Funds Underperforms Public Equities
“Some funds, particularly near us and then here on the East Coast, have decided to take the index method and invested with hundreds of partnerships. And what you find is you get the average return out of private equity, which is actually below public Equity.”
CalSTRS Mobilized a $5 Trillion Coalition for Firearm Principles
“We teamed up with a total of five trillion dollars of institutional asset To develop firearm principles and really go out there and engage with the entire distribution manufacturing chain”
US Public Pensions Will Eventually Spin Out Into Independent Entities
“And I've often said that at some point someone's going to look at this and say, hey, this is crazy, a flawed model. We need to move it external and operate it. Oddly enough, Delaware is the only place that you've seen that that happened in the eighties and nob…”
Teacher Pension Plans Are Typically the Most Underfunded in the US
“So most of the time, when you look at plans around the country, it's the teacher plan that's the most underfunded.”
CalSTRS Runs 70% of Its US Equity Portfolio In-House
“70% of our U.S. Equity is indexed. We run in-house, but it's indexed. And even then, about another 15% of that is in what now is called smart beta.”
Full Portfolio Put Protection in 2007 Would Have Cost 300 Bps
“We even, I remember in oh seven being called into the Department of Finance to ask myself and the counterpart at CalPERS to price out buying puts for the entire portfolio. And we came back and said, you know, it'll cost you 300 basis points on the return. Woul…”
Large Pension Plans Have Broken the Traditional 2-and-20 Fee Model
“I have said for probably over five years that two and 20 is gone, and that's been broken. Unfortunately, small plans still have to pay that, but larger plans have gone through that.”
CalSTRS Research Found Gold Fails as an Inflation Hedge
“We took a deep dive, look at gold. Is it a commodity? Is it an inflation hedge? Is it a currency hedge? What the heck is it? And came back with a lot. And unfortunately the answer is for us, it wasn't any of those, but some of our peers have bought it.”
Allocators Do Not Need to Like Their Asset Managers
“You don't actually have to like the people that manage our money. They just have to make us money. In fact, if we don't like them, it's a little bit easier because we're a little bit more objective”
US Is Unique in Keeping Public Pensions Embedded Inside Government
“The USA is about the only place Where particularly the pension plan asset management side is still very much part of the governmental entity. We're definitely in the org chart under the executive branch of California state government, right there with CalPERS …”
Average State Pension CIO Tenure Is Only Four Years
“I have seen the average tenure of a state pension CIO is only four years, and that has been true since the 19 eighties, and I think the reason for the constant turnover is, often time, the governance is unclear, and They run into problems about what decisions …”
CalSTRS Uses 100% Active Management for Emerging Market Equities
“Nine U.S. Equity in the developed markets were 50% indexed, and emerging markets were a hundred percent active.”
CalSTRS Fully Exited TIPS Portfolio When Yields Turned Negative
“So we sold out the entire portfolio when they were at negative yields, and went to the board and said, it just doesn't make sense to be there yet.”
CalSTRS Manages Half of Its Total Fund Internally
“We run half the fund in house, a hundred and ten billion dollars, which would be a huge money manager anywhere else.”
CalSTRS Portfolio Asset Allocation Breakdown Across Major Asset Classes
“Right now, we're about 54% global equity, and we are truly global, so about fifty-fifty U.S. And non-U.S. We've got probably 12% right now in fixed income, and that's mostly domestic, but we've got a little bit of universal global fixed income. 12% in real est…”
CalSTRS Commits Approximately $6 Billion Annually to Private Equity
“We commit about six billion a year into private equity.”