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Teachers’ Retirement System Mulls New Portfolio Solution

In a new request for information, the California State Teachers’ Retirement System looks to learn more about a modern portfolio management solution.

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(AP)
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The state entity charged with administering retirement-related benefits for nearly 900,000 California educators and their families is seeking information on a new digital solution.

In a request for information (RFI) released Wednesday, the California State Teachers’ Retirement System (CalSTRS) is soliciting “information, suggestions, methodologies, best practices and cost estimates for providing a fully integrated global equity portfolio management solution.” Among the takeaways:

  • CalSTRS administers a “complex global investment portfolio in excess of $312.2 billion in assets as of April 30,” according to the RFI. It’s the largest “educator-only pension fund” in the world. CalSTRS administers a “hybrid” retirement system of traditional defined benefit, cash balance and voluntary defined contribution plans, also delivering disability and survivor benefits and serving the state’s 879,000 public school educators and their families across 1,700 school districts and educational entities. Portfolio governance is delegated to the CALSTRS Investment Committee, which signs off on all “policies, asset allocation and strategic programs” with the core governing policy being the Investment Policy and Management Plan. (Find CalSTRS’ most recent annual financial report here.)
  • “Global Equity,” per the RFI, has “evolved from a portfolio structure” entirely reliant on external investment managers to “now managing $100 billion internally.” Such internally managed strategies now cover developing and emerging markets. In this RFI, CalSTRS wants information on “Portfolio/Order Management Systems (OMS)” capable of supporting these increasingly internally managed assets. The system may consider any responses it gets in creating specifications and requirements for “future solicitations.”
  • Requirements include a brief recitation of your organization’s history, primary business or activity and how long it has been “providing a global equity portfolio management product to clients”; and three client references besides CalSTRS. In portfolio management, respondents should describe their available tools for portfolio managers to manage investment portfolios and workflow support; explain how their system supports “portfolio construction using replication for index-oriented portfolios”; describe their system’s portfolio optimization features; explain how their system handles cash management and how that integrates with portfolio management; and explain their system’s chief capabilities for “performance attribution for global equities.” In investment operations, respondents should describe their system’s reporting tools including those enabling “broker maintenance, trades, positions, authorizations and reconciliations”; give an overview of how trade orders are done; and describe the entire trade life cycle as well as how their system supports “multi-currency trading capabilities for global equity and derivatives.” And, around data and interfaces, respondents should describe how their organization ensures data security; enumerate the instrument types their system processes; and specify whether their system can connect to BlackRock Aladdin, Omgeo OASYS/CTM, State Street Custodian via SWIFT messaging, “Interested Party SWIFT messaging v. SAP Financial Accounting System”; and the electronic trading platforms FXall, FX Connect, Newport and Direct Broker Access.
  • The RFI will be done at no cost to CalSTRS, the state entity notes, cautioning that this isn’t a solicitation and no contract will be forthcoming based on the RFI. The potential term and value of any subsequent contract are not specified. Questions are due by 5 p.m. July 15. Responses must be submitted here electronically by 5 p.m. Aug. 17.
Theo Douglas is Assistant Managing Editor of Industry Insider — California.