CalSTRS positions for global volatility with allocation changes

The volatility in global markets has prompted the $154 billion CalSTRS to an underweight global equities position, moving assets into cash, its chief investment officer, Chris Ailman, said.

CalSTRS’ long-term allocation to global equities sits at 54 per cent, and at the end of June the actual allocation was almost on target at 53.4 per cent. But Ailman said the fund was now underweight due to the high level of uncertainty in Europe and the US, and would stay there for the near term.

The fund has range of between 48 and 60 per cent within which it can allocate to global equities, and the team can meet at short notice to change the position.

But Ailman said “the most bullish we’d go to is a target or neutral weighting”.

The fund’s investment staff is constantly monitoring market conditions and communicating with the board on an intra-day basis. It is also holding regular meetings of its tactical asset allocation committee, to keep updated on the market action and make portfolio shifts if warranted.

The fund started making portfolio shifts in July, when Congress stalled on the debt ceiling discussion, and moved to an underweight position in US equities at that time.

At that time it had $3 billion in cash, or 2 per cent, which is double its target allocation.

At June 30 the fund was 3 per cent underweight its 21 per cent fixed-income allocation.

CalSTRS returned a stunning 23.1 per cent for the last financial year.