US - The California State Teachers' Retirement System (CalSTRS) will begin debating this week maiden investments in microfinance.
At an investment committee meeting on April 8, staff at the US$132.6bn pension fund will discuss whether or not CalSTRS should follow in the footsteps of Dutch funds like ABP and PGGM and funnel assets to microfinance investment vehicles.
According to a research report posted on the pension fund's website, demand for microfinance loans are estimated to reach $300bn, but supply is at a mere $38bn. "In much of the developing world, financial services need to be made available and improved in order to enable the economically poor to keep pace with economic growth," the report said.
The pension fund can get exposure to microfinance through a direct investment in a microfinance institution (MFI), through a private equity investment in a microfinance institution, through public equities or bonds, and through a specialised microfinance investment vehicle.
For the five years ended December 31 the Symbiotic Microfinance Index has provided returns similar to the Barclays Capital Aggregate. Adding microfinance to the portfolio could decrease volatility and provide diversification, but risks exist for investors including "not having a clear picture of the credit profile of the MFI's client base".
There has also been a recent uptick in delinquencies to 4.7% from 2.2%, the report said.
"It's an interesting area without a lot of people, or a lot of history," chief investment officer Christopher Ailman told GP.
He said the report stems from a request for the board last year for staff to conduct research on microfinance, commodities, liability driven investing and life settlements.
Staff is already on the second part of a three part discussion on commodities, which is also on the agenda for the April 8 meeting.
In addition, CalSTRS has announced it is seeking a consultant to select, monitor and assess hedge fund managers for a global macro strategy it will be undertaking.
The selected firm will help CalSTRS initiate, monitor and assess a global macro hedge fund strategy for its new absolute return asset class. The strategy will undergo an incubation period of not more than three years.
Staff will work with the consultant to select three to six hedge fund managers who will invest a $200m commitment in global macro strategies. Within the three-year period, the CalSTRS board will determine whether to expand or terminate the strategy.
Mark Evans has been appointed as a director at Independent Trustee Services (ITS) to lead trustee appointments in London.
The Pension Protection Fund (PPF) is consulting on changes to the actuarial assumptions it uses in valuations in a bid to better reflect the bulk annuity market, with schemes set to move into surplus on aggregate.
Private sector defined benefit (DB) schemes were 96.3% funded on a Pension Protection Fund (PPF) compensation basis at the end of July, according to the lifeboat fund's monthly index.
Conduent has completed the sale of its actuarial and human resource consulting business to private equity investor, H.I.G. Capital.