US - The California State Teachers' Retirement System (CalSTRS) has committed to its first China-specific fund targeting private equity opportunities in the growing Asian economy.
"These are China-based funds and they're going to be China-specific," stated Ailman, explaining that CalSTRS already had some exposure to Chinese private equity through previous investments.
"We have done, for example, a venture capital fund located just south of San Francisco in Silicon Valley [where] almost every company they bought was in China but with a US address, but in terms of a country-specific fund, we are starting to do those now."
Ailman explained that while China was undeniably of growing importance economically, it was hard for US investors to know how to approach it.
"To us, because we're a giant fund and we live in a glass bowl, China represents a very interesting challenge," he said.
"We know it's going to be a great investment market, yet it still is a communist country - it still behaves and acts in ways that maybe California doesn't like, so how do you make a long term investment in an area knowing there'll be a lot of bumps along the way?"
Ailman stated CalSTRS had been expanding its real estate and private equity investments into emerging markets more generally, but the potential challenges involved in realising real estate investments in China had prevented the fund from looking at China-specific property funds at this time.
Ailman continued to say that knowing how to weight China in a portfolio was an ongoing challenge for US pension plans.
"Right now, for most US pension plans, China is probably not more than even 1% of their asset allocation. I think the question is, if China does grow and pass the US as an economic power, how much exposure to China do you have going forward?"
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