Calstrs Selling U.S. Real Estate While Buying European Assetsby
Teacher fund says U.S. real estate ``priced to perfection''
CIO of $180 billion pension fund targets 7.5% returns
The $180 billion California State Teachers’ Retirement System is buying more equities and real estate in Europe while selling U.S. properties, which are “priced to perfection,” according to the fund’s chief investment officer.
“We will be selling some buildings and taking some profits,” CIO Christopher Ailman said during a television interview Wednesday on "Bloomberg <GO>." “Europe looks pretty reasonable and inexpensive compared to the U.S.A.”
Calster’s, the second-largest U.S. pension fund, plans to reallocate about $25 billion into new assets over the next three years in response to changing risks and efforts to obtain higher returns. Calstrs has a long-term goal of 7.5 percent annual returns and is on track to close its long-term funding deficit, according to an April 7 report by consultant Milliman.
Commodities and emerging-market investments are still risky, because of low oil prices and China’s slowdown, Ailman said.
“China is in a flat patch, where we will not see growth,” he said. “It doesn’t hurt the U.S.A, but it does hurt emerging markets in other parts of the world.”
Calstrs is also pressuring money managers to reduce fees to boost returns, Ailman said. He criticized hedge and private equity funds’ “two and 20” practice of charging 2 percent fees for assets under management while retaining 20 percent of gains on investments.
“The two and 20 model has been broken,” Ailman said. “We have broken through the model because it is competitive.”