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CalSTRS re-ups $250 mln with Invesco for emerging managers

  • Previous New & Next Generation accounts’ IRRs less than 10 pct
  • Separate account will target firms raising Funds I-III
  • CalSTRS has 8.2 pct allocation to PE

California State Teachers’ Retirement System allocated $250 million to a separately managed account with Invesco Private Capital to direct commitments to new fund managers, spokesman Ricardo Duran told Buyouts in an email.

The fund, New & Next Generation IV, will generally commit to PE firms raising their first, second or third institutional fund. Invesco will likely direct most of the $250 million to funds raising $1 billion or less, Duran said.

The New & Next Generation program is an effort to “partner with diverse private equity firms that represent the demographics of California,” according to a press release from 2012.

“New & Next Generation will pursue private equity returns by accessing small, niche and diverse managers and markets,” Duran wrote in the email. “The commitment represents no changes to our investment strategy.”

CalSTRS’s previous New & Next Generation fund, a $250 million 2012 vintage, was netting a 0.57 percent internal rate of return since inception as of Sept. 30, public-pension records show. Its 2005 and 2008 accounts for the same strategy were netting a 9.85 percent IRR and 8.53 percent IRR, respectively, as of that date.

Roughly 8.2 percent of CalSTRS’s assets were in PE as of March 31. The $202.9 billion retirement system has a 9 percent target allocation to the asset class.

The $16.7 billion private equity portfolio has delivered a 13.12 percent internal rate of return as of Sept. 30, CalSTRS’ website shows.

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Nurses take care of newborn babies wearing chicken costumes to celebrate the Chinese New Year of Rooster in the nursery room of a hospital in Bangkok on Jan. 27, 2017. Photo courtesy Reuters/Athit Perawongmetha