US - The California State Teachers' Retirement System (CalSTRS) will today decide whether to introduce a risk overlay strategy across its $146.4bn portfolio.
The scheme's investment committee has been considering the idea since last September but will today vote on whether to go ahead with the plan.
The move follows similar developments by pension funds in the US and Europe including ATP in Denmark, CalPERS and Alaska's PFD. Rather than replacing asset classes with risk categories, however, the CalSTRS investment committee is instead discussing overlaying six broad risk factors developed by the fund across its existing five asset classes (global equity, fixed income, real estate and absolute return).
The risk factors include: global economic growth risk; interest rate risk; inflation risk; liquidity - fluid market risk; leverage/financing risk and governance (regulatory) risk.
If approved, CalSTRS staff and consultants will develop measures for each risk and integrate the risks into future investment committee reports.
"We've taken the current thinking in investment theory and pushed it to a new level to position our portfolio for sustained future growth," said CalSTRS chief investment officer Christopher Ailman.
"This overlay model will allow us to analyse multiple risks across the entire portfolio, and not be limited by the old framework."
Meanwhile, CalSTRS has awarded a $500m currency overlay mandate to Millennium Global.
The mandate marks a new relationship for the firm and pension fund and was secured following a competitive tender. It brings Millennium Global's total AuM to over $12bn.
Millennium Global CEO, Mark Astley said: "We are delighted to be working with CalSTRS as they seek to manage their currency exposure and increase their returns from an active currency overlay strategy. This mandate confirms our position as a leader in the specialist currency overlay space."
Partner Insight: In recent years, pensions administrators have seen scheme member engagement increase significantly. The advent of Pensions Freedoms in 2015 and the increased choices faced by members have led to a sea-change in the levels and types of...
Two consultancies have reported decreases in defined benefit (DB) transfer quotation requests in Q3, and said guaranteed minimum pension (GMP) equalisation could impact transfer activity.
The Association of Consulting Actuaries (ACA) and Royal London have proposed a "pensions pound" to "radically simplify" defined benefit (DB) pensions rights.
Around 5,000 members of the Johnston Press Pension Plan are expected to enter the Pension Protection Fund (PPF) following a pre-pack administration (PPA) by its sponsor.