The California State Teachers’ Retirement System has committed $200 million from its Private Equity Proactive Portfolio, which focuses on small, niche emerging managers. CalSTRS made a $100 million pledge to Chicago-based Muller & Monroe Asset Management, which is targeting $400 million for its M2 Private Equity Fund of Funds II. CalSTRS also committed $100 million to BAML Capital Access Funds Management. The commitments expand the system’s emerging manager program to $1.9 billion.
The California State Teachers’ Retirement System (CalSTRS) today announced the commitment of $200 million to diversify its Private Equity
Proactive Portfolio, which reaches small, niche emerging managers including those in underserved domestic markets.
This latest commitment expands the program, established in 2003, to $1.9 billion. The program adds a new partner, Chicago-based Muller & Monroe Asset Management, with a $100 million commitment. BAML Capital Access Funds Management, LLC (BAML, a subsidiary of Bank of America Corporation), an existing relationship, is expanding with another $100 million commitment.
CalSTRS will invest in Muller & Monroe’s $400 million commingled fund, known as the M2 Private Equity Fund of Funds II (MPEFF II). The commingled fund focuses on emerging domestic markets, including funds that are managed by newer and next-generation managers and
by seasoned investors focused on a specific niche or theme found in the lower-middle market.
“These two partners are leaders in the emerging manager space, which unlocks the potential of small managers in their first, second or third institutional funds, and in the underserved areas of California’s urban and rural areas,” said CalSTRS Chief Investment Officer Christopher J.
Ailman. “This strategy is crucial to our efforts to generate long-term value in new and innovative ways.”
“CalSTRS views MPEFF II’s investment strategy as consistent with the objective and principle guiding CalSTRS’ Private Equity Proactive Portfolio,” said CalSTRS Portfolio Manager Solange Brooks.
“The Private Equity Proactive Portfolio was created to diversify the Private Equity Core Portfolio into unique opportunities with innovative strategies.”
CalSTRS will invest in its fourth BAML fund since 2003, targeting underserved domestic markets, which is the BAML specialty. CalSTRS has the option of increasing its commitment to $200 million or more in the future.
“CalSTRS has been committed to traditionally underserved communities in the inner cities and rural areas since 2003 and this fund directs badly needed capital to that sector,” Ms. Brooks said.
The Private Equity Proactive Portfolio was created within CalSTRS’ $21.5 billion private equity portfolio under the leadership of Director Margot Wirth. The Proactive Private Equity Portfolio has 123 active funds managed by three separate accounts, BAML, Invesco, and now Muller & Monroe.
CalSTRS released its first Diversity in Investment Management Report to the Legislature in February 2014, outlining progress in bringing emerging managers into the stewardship of its investments.
The California State Teachers’ Retirement System, with a portfolio valued at $180.8 billion as of February 28, 2014, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California’s 868,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.