CalSTRS CIO: ‘We’re constantly looking at secondaries’

California State Teachers’ Retirement System is always looking at opportunities in the secondaries market though the right time has proved hard to pinpoint, according to the pension’s chief investment officer.

Speaking to sister publication Private Equity International, Chris Ailman said the US’s second-largest public pension was constantly looking at selling individual partnerships or slices of its private equity portfolio. He also sees the value of being able to buy private equity assets at even a small discount. The illiquidity of the market, however, makes optimum pricing difficult to achieve.

“I think as usual you want to be a buyer when everyone is interested in selling and when everyone wants to buy, you want to sell,” Ailman said. “It’s just hard in that it’s still a highly illiquid market and those transactions still take a considerable period of time.”

The illiquidity is compounded by sellers entering the market for different reasons, making it difficult to predict when attractive opportunities will arise, he added.

“The [secondaries] market has grown more than I expected but I still don’t think it’s of large-scale size.”

In July CalSTRS altered its secondaries policy to allow it to buy in complex transactions. It also broadened its definition of the asset pool that can be bought or sold, stating that it can consist of “limited partnership interests, co-investments, general partner interests, separately managed accounts, portfolio companies, or a combination of the above”.

In October 2016 CalSTRS entered talks with Lazard over the sale of up to $1 billion of real estate assets on the secondaries market. It is not clear if the sale closed.

CalSTRS has around $18 billion in private equity assets under management equivalent to approximately 8 percent of its $224.8 billion total portfolio, according to its website. It is the 11th largest pension fund in the world, according to pensions advisor Willis Towers Watson.