CalSTRS is thinking about hiring equity managers who focus on China for the first time.
HONG KONG: For the first time ever, the California State Teachers’ Retirement System (CalSTRS) is considering hiring equity managers who focus on China. This is because there is a growing need to diversify assets because of worries about inflation and recession.
The No. 2 U.S. pension fund, CalSTRS, said in a statement to Reuters that it had about $3.7 billion worth of investments in Chinese equities at the end of June. These investments were made through both internally and externally managed strategies.
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Last month, the fund put out a request for proposals (RFP) for fund managers who wanted to set up new investment categories for Chinese stocks. By October 10, funds that were interested in the proposal had to give a response.
The pension manager said in a statement that the purpose of getting proposals from China-focused managers is to “find out if there might be a better way” to implement the current China equity exposure.
Due to rising geopolitical tensions, U.S. institutional investors with a lot of money have stopped putting their money into Chinese stocks in general over the past few years. This is why CalSTRS has decided to do this.
Some of Asia’s biggest hedge funds that focus on China are also buying more stocks from countries other than China. This is because regulators are keeping a close eye on them, policies are uncertain, and the economy on the mainland is slowing down, all of which force them to cut back on their exposure to offshore Chinese assets.
Insiders in the industry say that some recent moves by big investors show that they are trying to spread out their assets and locations as the western world deals with a tighter Federal Reserve policy and an energy crisis in Europe.
According to the RFP posted on its website, CalSTRS, which had assets worth about $311.7 billion at the end of July, plans to set up three investment strategy categories that focus on China as part of its new plan.
According to the RFP, two of them will focus on Greater China equities and onshore Chinese shares, while the other will be measured against the MSCI China index.
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“Depending on our RFP due-diligence findings, we (CalSTRS) would create new China portfolios if we thought it would be a better way to implement our existing China equity exposure,” it said in the statement.
