CalSTRS Restructures to Bring More Assets In-House

The California State Teachers’ Retirement System (CalSTRS) has hired its first chief operating investment officer (COIO) in an effort to bring more investment management in-house.

The new leadership structure “matches what you find in most large investment money managers,” said CIO Chris Ailman. He added that it also would be instrumental in bringing internally managed assets to 60% of its portfolio, from the current 45%.

“This new structure puts in place a smoother operation for a portfolio of our size and allows for better oversight by the board, the deputy CIO, and myself,” Ailman said.

The $186.4 billion pension plan chose Director of Investment Operations Debra Smith as the inaugural COIO after a nationwide search.

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According to CalSTRS, Smith will be responsible for overseeing investment operations, branch administration, and a unit covering compliance, internal controls, ethics, and business continuity. She will also report to the investment committee twice a year.

“This new structure puts in place a smoother operation for a portfolio of our size and allows for better oversight by the board, the deputy CIO, and myself.” —Chris Ailman

“I look forward to collaborating with investment management at CalSTRS and with our strategic business partners to put in place adaptive and innovative solutions to achieve our mission, which is securing the financial future and sustaining the trust of California’s educators,” Smith said.

The new COIO joined the California pension plan in 1998 as an associate investment officer and moved up the ranks to director of investment operations in 2010. She holds a bachelor’s degree from California State University.

CalSTRS also promoted Glenn Hosokawa and Paul Shantic—acting co-directors of fixed income—to director of the $22.4 billion asset class and director of inflation sensitive respectively. The pension plan created the $1.4 billion inflation sensitive bucket as part of the restructure.

Related Content: CalSTRS Tackles the Risk of Running Out of Money

The Boston-based firm has received subpoenas from the Department of Justice and the Securities and Exchange Commission, according to its quarterly filing.

State Street Corporation revealed it is being investigated by government authorities about how it acquires asset-servicing business from public pension plans.

In a quarterly filing Monday, the Boston-based company said it has hired lawyers after receiving subpoenas from the Department of Justice and the Securities and Exchange Commission (SEC).

“We are cooperating with governmental authorities and have asked counsel to conduct an internal review of these matters,” a State Street spokesperson said.

According to State Street’s 10-Q report, legal counsel has been advised to review its “use of consultants and lobbyists in our solicitation of business of public retirement plans.”

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The review also includes at least one stance of political contributions by a State Street’s consultants during and after a public bidding process, the firm said.

In the same filing, State Street declared that unfavorable outcomes of the investigation could cause “a material adverse effect on our business and reputation.”

The firm recently settled a class-action lawsuit for $60 million that alleged actions taken by the bank caused investors to buy its stock at inflated prices. It is also being sued by several large US public pension plans for allegedly using deceptive practices in FX transactions.

As of September 30, State Street had $28.5 trillion of assets under custody and $2.42 trillion under management.