* $184.8 bln pension wants to back "breakout groups"
* Emerging managers to be folded into main PE portfolio
* PE portfolio 65 percent exposed to 2005-2008 vintages
By Sam Sutton
NEW YORK, July 11 (Reuters-BUYOUTS) - The California State
Teachers' Retirement System plans to put more emphasis on small
and mid-market buyout, debt-related and emerging market funds in
its private equity portfolio during the 2015 fiscal year ending
June 30, according to an investment plan released by the
retirement system in advance of its board meeting on Friday.
Room for the pivot will be made by reducing the size of
commitments to large buyout funds, said Director of Private
Equity Margot Wirth.
The shift in emphasis stems in part from CalSTRS's exposure
to pre-financial crisis vintage mega-buyout funds, Wirth said.
Vintage funds from 2005 to 2008 account for 65 percent of the
portfolio's estimated $21 billion private-equity exposure,
according to the investment plan, and many of those funds have
performed poorly relative to benchmarks.
"Those vintages are not going to end up terrible," Wirth
said. "We just had a very high exposure to those types of
The $184.8 billion retirement system, which has some 125
private equity fund managers, is particularly interested in
backing "breakout groups," Wirth said, referring to fund
managers with strong track records at the lower end of the
buyout market. She cited Palladium Equity Partners and ICV
Partners as two such firms that CalSTRS has recently backed.
The retirement system already has exposure to emerging
managers and niche strategies through its $818 million Private
Equity Proactive Portfolio. That program had been managed by a
dedicated staff operating independently of the rest of the
private equity team for most of the last decade, Wirth said.
CalSTRS has spent the last year integrating that staff into
its main private equity team, moving Proactive opportunities
through the same due diligence process used for larger, more
The Proactive portfolio consists of 123 active vehicles
backed through funds-of-funds managed by Invesco, Muller &
Monroe Asset Management and BAML Capital Access Funds
Management, a Bank of America Corporation subsidiary. In April,
CalSTRS boosted its allocation to the program by increasing
BAML's mandate by $100 million and by committing $100 million to
Muller & Monroe's latest $400 million-target fund of funds.
The CalSTRS 2015 fiscal-year plan also calls for
improvements to the $1.4 billion co-investment program. Wirth
said the "ongoing process" could include additional improvements
to its portfolio analytics, risk control and due diligence
(Buyouts Magazine is a Thomson Reuters publication. Editor: