CalSTRS’ investment committee Thursday approved a new private equity investment policy, adopting a new lower benchmark for its $20.1 billion portfolio… During the discussion, Keith Yamanaka, a delegate on the committee for board member State Superintendent of Public Instruction, Tony Thurmond, questioned CalSTRS’ investment in private equity given the lower potential return.
Investors are supposed to receive a higher return for private equity due to the risks presented by the asset class, Mr. Yamanaka said. If the risks have not changed but the returns CalSTRS officials are expect to receive are lower, does the potential risk/return profile of private equity still justify investment in the asset class, he queried.
“We may not want to overlook a potential issue that could come back to haunt us,” he said. In response, investment committee chairman Harry M. Keiley asked Ms. Wirth and Mr. Hartt to give their quick thoughts but suggested that a fuller later discussion might be warranted.
“It is what it is,” Mr. Hartt said. “It’s just the fact of what is going on” and what Meketa executives believe the future return prospects are for the asset class. There may tactical changes CalSTRS can make to reap more returns from private equity such as the collaborative model, which would cut down costs, Mr. Hartt said.
This article quotes selections from “CalSTRS signs Cambridge as Americas private equity consultant” by Arleen Jacobius, in P&I Online, July 12, 2019.