CalSTRS Seeks Commodity Investments

The US's second-largest public pension fund is eying commodity investments as a hedge against the risk of inflation.

(June 1, 2010) — The California State Teachers’ Retirement System (CalSTRS) is expected to make its first investment in commodities to combat the risk of increasing inflation while critics worry large investors contributed to the inflation of commodity prices in 2008 when oil, wheat, cotton and other markets swelled. according to the Financial Times.

The move reflects a burgeoning investor desire for raw materials as US federal commodities regulators evaluate the merits of imposing limits on institutional investors’ exposure to raw material markets, the FT reported. CalSTRS’ pull toward commodities follows the investment of the $198.7 billion California Public Employees’ Retirement System (CalPERS), in the asset class.

CalSTRS is expected to vote on Thursday on whether to adopt staff recommendation and move forward with a long-term allocation or decline to adopt the strategy, said fund spokesperson Ricardo Duran to ai5000. The fund will add bulk goods such as oil, sugar and copper to its $138.5 billion portfolio of equities, bonds, real estate and private equity.

Amid an uncertain economic climate, opinions are mixed on whether inherently volatile commodities will in fact serve as a hedge against inflation. A Bloomberg article published today exposed how concern about China may explain a recent sell-off in commodities, which have suffered the biggest drop since Lehman Brothers Holdings Inc. collapsed. “As risk-taking falls, expected growth is reduced,” said Colin P. Fenton, the chief executive officer of Curium Capital Advisors LLC in Boston, to Bloomberg. “Demand for commodities is going to be softer than it might otherwise have been.”

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John Kinsey, who helps manage $995 million at Caldwell Investment Management Ltd. in Toronto, added that he sees uncertainty as the biggest problem, with commodities “being attacked with these concerns about the debt situation in Europe and the steps that China has taken to tighten,” he said to Bloomberg. “People are afraid this is going to slow the economy. It’s hard to see a way out of it.”



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

China National Pension Fund Adviser Zhang Plans Hedge Fund‎

An adviser to China’s enormous state pension fund is planning to return to the hedge fund world by forming JT Capital Management, a China-focused fund.

(June 1, 2010) — A top adviser to China’s $130 billion state pension fund and a former Asia prime brokerage head at Morgan Stanley are working together to start a China-focused hedge fund in September.

According to Bloomberg, Hong Kong-based JT Capital Management Ltd. is planning to raise $100 million for the fund. Chief Investment Officer Larry Zhang, formerly a partner at GSA Capital Partners in London who will be JT Capital’s co-chief executive officer, told Bloomberg that he will team up with Kurt Baker, who was previously at Morgan Stanley. The fund will trade Chinese stocks listed domestically or on an international exchange, such as Hong Kong or the U.S.

While China hedge fund managers have found it difficult to raise money from international firms increasingly worried about transparency and risk control, Zhang said in an interview with the news agency that he and Baker will team up to build an investment platform with local information access and high levels of transparency. At JT Capital, which will maintain a research office in Beijing, Zhang will be responsible for overseeing investments and Baker will head operations.

JT Capital will use research of macro-economic cycles, government policies and bottom-up fundamental analyses to pick stocks, Bloomberg reported, while short-selling single stocks listed internationally.

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To contact the <em>aiCIO</em> editor of this story: Janhavi Agarkar at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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