CalSTRS to ramp up Asia PE investments – exclusive

The US's second-biggest public pension could double or triple its exposure to the region by 2021, its chief investment officer tells Private Equity International.

The California State Teachers’ Retirement System, the US’s second-biggest public pension, is planning to significantly increase its Asian private equity exposure.

“The fund’s Asia private equity exposure is quite small relative to the rest of the portfolio, less than $2 billion, but should double or triple in the next three to five years,” Christopher Ailman, chief investment officer of CalSTRS, told Private Equity International.

Ailman added: “We have had mixed results [in Asia] but clearly the opportunities in China are tremendous even for lower risk investments just because of the sheer numbers. As always, it is the due diligence and picking the right partners [that remains a challenge].”

CalSTRS’ most recent capital commitments in the region include $200 million to Affinity Asia Pacific Fund V, $50 million to Carlyle Asia Partners V, $125 million to Bain Capital Asia Fund III and $150 million to PAG Asia Capital II, according to PEI data.

About 8 percent, or $18 billion, of CalSTRS’ total assets is allocated to private equity, an asset class that delivered a 13.1 percent return for the fund as of the end of September, according to the pension’s latest performance report.

The City of West Sacramento-based fund is also seeking a collaborative investment programme alongside US and international pensions, according to minutes from its investment committee meeting in early May.

Ailman said at the board meeting that the collaborative model will enable CalSTRS to pursue different structures such as separate accounts, direct investments and co-investments, which are outside the typical limited partnership.

CalSTRS had $224.8 billion in assets as of end-April, according to its website.