Monday, June 30, 2008

CalSTRs moves to diversify into roads, bridges, power lines

CalSTRs and CalPERS seem to be taking different approaches to long-term investing. Saturday we posted "Pension Funds Drive Growth Of Alternative Assets. And: CalPERS Up 68% on Commodities; Down 31% on Real Estate. Action, Baby, Action!". Today, from Pensions & Investments:
CalSTRS has made the first move in implementing a new infrastructure portfolio that could top $1 billion and help the pension fund reap excess returns while hedging against inflation.

The $169.2 billion California State Teachers’ Retirement System, Sacramento, is tiptoeing into infrastructure — potentially investing in power lines, bridges, ports and other assets — after mulling over the asset class for more than a year.

At the June 4 investment committee meeting, members approved the first draft of the policy for a fixed asset financing portfolio, or infrastructure portfolio, that will begin at $1 billion, but will grow if the initial investments prove successful, according to an agenda item from the meeting.

CalSTRS, like other investors who have recently carved a slot for infrastructure in their portfolios, sees the asset class as a hedge for long-term liabilities, a hedge against inflation and an avenue of diversification for the overall investment portfolio.

Also prompting interest is the expected low returns of the equitymarkets in coming years, said Alan Biller, president and founder of consulting firm Alan D. Biller & Associates Inc., Menlo Park, Calif....MORE

This isn't to say that CalPERS hasn't done some infrastructure stuff, and they did announce $640 mil. into Khosla but, with all the noise they make as a member of CERES on socially responsible investing they could do more, a lot more.

With just under a quarter-trillion in assets they've announced less in clean energy investments than a single individual, T. Boone Pickens. They could, for example, sell off the $2,500,000,000 worth of ExxonMobil they own and build a wind farm 1/4 the size of Mr. Pickens'. Or they could follow the CalSTRS example and simply go about their fiduciary business. Whatev.