Inside CalSTRS Investments: CalSTRS Director of Inflation Sensitive Paul Shantic provides a quick overview of how the Inflation Sensitive team contributes to the overall health of the CalSTRS investment portfolio….(read more)

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Inside CalSTRS Investments: Inflation Sensitive 2016

The California State Teachers’ Retirement System (CalSTRS) is one of the largest pension funds in the United States, with a substantial portfolio of investments across various asset classes. One important component of CalSTRS’ investment strategy is its Inflation Sensitive portfolio, which is designed to hedge against the potential negative impact of inflation on the fund’s overall returns.

In 2016, the Inflation Sensitive portfolio saw some significant developments and changes in its investment approach. This article will provide an overview of the key aspects of the Inflation Sensitive portfolio and how it performed in 2016.

The Inflation Sensitive portfolio is an integral part of CalSTRS’ broader investment strategy, as it aims to protect the fund’s assets against the erosion of purchasing power caused by inflation. The portfolio includes investments in a range of assets that have historically demonstrated a strong positive correlation with inflation, such as Treasury Inflation-Protected Securities (TIPS), commodities, and real estate.

In 2016, the Inflation Sensitive portfolio underwent a review and rebalancing process to ensure that it was well-positioned to achieve its objectives in the current market environment. This process involved a thorough analysis of the performance of existing investments, as well as an assessment of the potential opportunities and risks in the market.

One key development in the Inflation Sensitive portfolio in 2016 was the increased emphasis on diversification. The portfolio managers recognized the need to not only invest in traditional inflation-hedging assets like TIPS but also to explore opportunities in other asset classes that have the potential to perform well in an inflationary environment. This led to the inclusion of alternative investments such as infrastructure, natural resources, and inflation-linked bonds, which added additional diversification to the portfolio.

In addition to diversification, the Inflation Sensitive portfolio also focused on enhancing its risk management capabilities in 2016. This involved a closer monitoring of the potential impact of macroeconomic factors on the portfolio, as well as the implementation of more sophisticated risk mitigation techniques, such as the use of derivatives and other hedging strategies.

Overall, the Inflation Sensitive portfolio delivered solid performance in 2016, effectively providing a hedge against inflation for the broader CalSTRS investment portfolio. The additional diversification and risk management measures implemented during the year helped to strengthen the portfolio’s resilience and ensure that it could continue to fulfill its role as a key component of the fund’s overall investment strategy.

Looking ahead, the Inflation Sensitive portfolio will continue to play a crucial role in CalSTRS’ investment approach, as the fund seeks to navigate the potential impact of inflation on its long-term returns. The portfolio managers remain committed to actively monitoring market developments and exploring new investment opportunities to further enhance the portfolio’s performance and resilience.

In conclusion, the Inflation Sensitive portfolio at CalSTRS underwent important developments and changes in 2016, as it sought to strengthen its risk management capabilities and enhance its diversification. The portfolio delivered solid performance during the year, providing a valuable hedge against inflation for the broader CalSTRS investment portfolio. Going forward, the portfolio will continue to be a key pillar of CalSTRS’ investment strategy, as the fund seeks to protect and grow the assets of its members in an ever-changing market environment.