CalSTRS

Investment Strategy

The California State Teachers’ Retirement System (CalSTRS) is the largest educator-only pension fund in the United States and the second-largest public pension fund in California, managing approximately $340 billion in assets as of mid-2024. CalSTRS serves nearly one million active and retired California public school educators, from pre-kindergarten through community college.

CalSTRS’ investment strategy is built around a diversified portfolio designed to meet its long-term actuarial return target. The strategic asset allocation, set by the Teachers’ Retirement Board, divides the portfolio across global equity (approximately 42%), fixed income (12%), real estate (14%), private equity (13%), inflation sensitive (6%), risk mitigating strategies (10%), and cash/liquidity (3%). This allocation reflects CalSTRS’ belief that a meaningful allocation to private markets and real assets is necessary to achieve its return objectives while managing overall portfolio risk.

The system’s Investment Committee regularly reviews and adjusts the strategic allocation, and CalSTRS publishes its asset allocation policy and investment beliefs on its website. A core principle is long-term value creation — CalSTRS’ investment horizon spans decades, aligning with the multi-generational nature of its pension obligations.

Private Equity & Alternatives Program

CalSTRS’ private equity program is one of the largest among U.S. public pension plans, with committed capital across hundreds of GP relationships. The program targets a diversified mix of buyout, venture capital, growth equity, distressed, and secondary strategies. According to CalSTRS’ publicly available investment reports, the PE portfolio has delivered strong long-term returns and is a significant contributor to the total fund’s performance.

CalSTRS typically commits $100 million to $500 million per fund, depending on fund size and strategy. The system has relationships with many of the largest global private equity firms and also maintains exposure to mid-market and sector-specialist managers. CalSTRS has been an active participant in co-investment programs, deploying capital alongside its GP partners to reduce fees and increase exposure to specific transactions.

The real estate program at CalSTRS is also substantial, targeting core, value-add, and opportunistic strategies across domestic and international markets. The system invests through commingled funds, joint ventures, and separate accounts. Infrastructure investments focus on essential services and assets with inflation-linked revenue streams.

CalSTRS has publicly committed to integrating ESG considerations across its investment portfolio. The system evaluates managers on their approach to responsible investment and is a signatory to multiple ESG-related initiatives.

Recent Activity

Over the past two years, CalSTRS has continued its steady build-out of private market allocations. The fund’s total assets have grown significantly from the $254.7 billion reported in October 2020, reflecting strong investment returns and ongoing capital deployment. As of June 2022, CalSTRS managed approximately $348 billion before subsequent market movements.

The system has been actively expanding its co-investment and direct investment capabilities. CalSTRS added dedicated staff to its private equity and real estate teams and increased the pace of co-investment activity alongside existing GP relationships. The Board approved an updated strategic plan that maintains elevated allocations to private equity and real assets.

CalSTRS has also been at the forefront of climate-related investment policy among U.S. pension funds. The system published a comprehensive climate risk analysis and has committed to incorporating climate considerations into investment decision-making across all asset classes. CalSTRS was involved in legislative discussions around fossil fuel divestment in California, though the Board has generally advocated for engagement over blanket divestment.

How to Approach

CalSTRS evaluates potential GP relationships through its internal investment staff, with support from external investment consultants. The system does not typically issue formal RFPs for private market investments. Instead, the investment team sources opportunities through its existing network, consultant recommendations, and inbound proposals.

Fund managers interested in working with CalSTRS should review the system’s publicly available investment policies, strategic plan, and asset allocation targets. Board meeting materials, including investment committee presentations, are published on the CalSTRS website and offer detailed insight into current priorities and themes.

CalSTRS uses several investment consultants, including Meketa Investment Group and StepStone Group, across its alternative investment programs. Building a relationship with these consultants can be a productive channel for emerging and mid-market managers seeking CalSTRS’ attention.

The system places significant emphasis on alignment of interests, fee transparency, GP co-investment, and operational excellence. Managers should be prepared to provide detailed reporting and comply with CalSTRS’ transparency requirements, which include public disclosure of fund commitments and performance data. CalSTRS staff attend major institutional investor conferences and are accessible through professional networks, though securing a commitment requires a formal evaluation process.