Revised portfolio managers under CalSTRS' SISS shift towards private market investments
California State Teachers' Retirement System (CalSTRS) has announced a significant change in direction for its Sustainable Investment and Stewardship Strategies (SISS) portfolio. The strategic shift will see the SISS portfolio focus exclusively on private markets, marking a departure from its previous emphasis on public equities and other public market assets.
The move forms part of CalSTRS' wider net zero ambition, aiming to better integrate sustainability and stewardship objectives within investments that may offer greater influence and impact in private markets compared to public holdings. This transition involves "graduating" the SISS public holdings into the broader CalSTRS portfolio, thereby overhauling its asset manager base and dedicating SISS fully to private market investments.
The new SISS private market mandate implies an appetite for other asset classes, such as climate solutions, and CalSTRS is planning to expand investments in transition assets as part of its strategy. As of December 2024, 19% of the SISS portfolio was already allocated to private markets, with significant holdings in infrastructure, hybrid/innovative investment, and venture and growth assets.
It's important to note that the SISS public equity portfolio was not transferred wholesale during the transition. Instead, it will be absorbed into the broader CalSTRS portfolio. The specifics on the revised asset allocation percentages or the particular private market sectors targeted were not detailed in the sources, but the reshuffle of asset managers indicates a significant reorientation of how CalSTRS approaches sustainable investing through SISS.
This shift aligns with a broader institutional move towards impact-driven private investments where stewardship and sustainability can be more directly managed. In fact, CalSTRS' Chief Investment Officer, Chris Ailman, has expressed his views on political headwinds and investing in climate solutions, highlighting the system's commitment to reducing emissions from its investment portfolio by 50% by 2030 and increasing climate solutions allocations as part of this plan.
In conclusion, CalSTRS' decision to focus its SISS portfolio on private markets marks a significant step towards its net zero ambition. The move signals a growing recognition of the potential for private market investments to drive sustainable change and deliver long-term returns. As CalSTRS continues to implement this strategy, it will be interesting to see how the asset allocation evolves and the impact it has on the broader private market landscape.
References: 1. CalSTRS Announces Strategic Focus on Private Markets for Sustainable Investment and Stewardship Strategies 2. CalSTRS to Overhaul Asset Manager Base as SISS Portfolio Shifts to Private Markets 3. CalSTRS' SISS Portfolio to Focus Exclusively on Private Markets 4. CalSTRS Shifts SISS Portfolio Towards Private Markets 5. CalSTRS to Focus SISS Portfolio on Private Markets
CalSTRS has decided to dedicate its Sustainable Investment and Stewardship Strategies (SISS) portfolio exclusively to private markets, indicating an interest in expanding investments in sectors like climate solutions. As a result, the SISS public equity portfolio will be absorbed into the broader CalSTRS portfolio, allowing the former to focus solely on private market investments.
The strategic shift aims to better integrate sustainability and stewardship objectives within investments that may offer greater influence and impact in private markets compared to public holdings. This move is aligned with a broader institutional move towards impact-driven private investments where stewardship and sustainability can be more directly managed.
