Private Equity News & Analysis

CalSTRS backs emerging manager FoF

The pension is committing $100m to GPs focused on inner-city and rural markets at a time when SME capital is in 'short supply', says CIO Chris Ailman.

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The $134 billion California State Teachers’ Retirement System has committed $100 million to the Bank of America Merrill Lynch Capital Access Fund, managed by Bank of America Merrill Lynch to focus on small and emerging fund managers in inner-city and rural markets.
 
CalSTRS has the option of increasing its commitment to $200 million within four years to the Bank of America Merrill Lynch Capital Access Fund, which is part of the pension's $1.135 billion “Proactive Portfolio”. It is the fourth such fund of funds CalSTRS has backed.

This fund extends new capital into traditionally underserved communities in the inner cities and rural areas, during a time when the capital that small businesses need in order to grow is in short supply.

Chris Ailman
As part of an initiative to invest 2 percent of its total portfolio in underserved markets, particularly in California, the pension's proactive portfolio supports funds that focus on companies owned or managed by women or ethnic minorities, those located in low- and moderate-income areas or those in areas with limited access to investment capital. It also supports new and emerging managers.
 
“This fund extends new capital into traditionally underserved communities in the inner cities and rural areas, during a time when the capital that small businesses need in order to grow is in short supply, CalSTRS chief executive officer Christopher Ailman said in a statement. “These opportunities, we believe, will yield significant long-term value that will benefit the retirement fund.”
 
CalSTRS, the second-largest pension fund in the US, said last year that it was moving around its allocations to various asset classes, including bumping its allocation to private equity from 11 percent to 12 percent. Near the end of 2009 the pension committed $80 million to TA Associates XI, $20 million to TA Subordinated Debt Fund III, $50 million to Yucaipa Corporate Initiatives Fund II and $100 million each to Energy Capital Partners II and Hellman & Friedman VII.
 
In January CalSTRS reported a $42.6 billion shortfall due to investment losses, saying it needed to seek increases in contributions as a result.