CalSTRS overhauls SISS portfolio managers in pivot to private markets

The California State Teachers’ Retirement System’s (CalSTRS) Sustainable Investment and Stewardship Strategies (SISS) portfolio has been central to the $367.7bn pension fund’s climate solutions investments. Over time, the fund plans to deploy 1% of its overall assets, some $3,6bn into the strategy.

In May this year, the CalSTRS investment committee considered a recommendation to move the SISS public portfolio into the CalSTRS global equity portfolio.

Earlier this month, the committee met again. Documents on the agenda show that the SISS portfolio’s asset manager exposures are changing – a result of SISS now being dedicated to private markets.

Manager exposure

On the agenda at CalSTRS’ offsite board meeting on July 8 was the investment committee portfolio risk report. Within it, CalSTRS disclosed the fund’s largest asset manager exposures – including that of the SISS portfolio.

The two largest SISS exposures
are Nordea Global Stars (13.1%) and Starboard Value (12.7%). Both exposures have increased relative to 2024. Generate (11.5%) is a close third.

Last year, this list of asset managers looked vastly different. In 2024, the top two managers – Generation and Schroders – accounted for over 42% of the SISS portfolio. This year, neither Generation nor Schroders was listed in SISS exposures.

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Private markets

The changing asset manager exposure for SISS has a lot to do with the May 2025 recommendation to ‘graduate’ the SISS public holdings into the wider CalSTRS global equity portfolio. At the time, this was recommended to the board by CalSTRS staff and Meketa Investment Group – the Board’s consultant.

The change is now being implemented, which is reflected in the changing asset manager exposures.

“The SISS public equity portfolio was not transferred wholesale as a number of allocation decisions were made prior to the transition. This ensured transferred strategies were complementary to the CalSTRS Global Equity Portfolio”, a CalSTRS spokesperson told Net Zero Investor.

“The SISS Portfolio is now dedicated to expanding private-market investments”, the spokesperson confirmed.

The new private market mandate also implies a new SISS appetite for other asset classes. Based on the May 2025 recommendation, SISS will now be geared towards investing in climate solutions “across a wide risk-return spectrum, from infrastructure to venture capital-like opportunities”.

The SISS embrace of private markets also implies a change in its performance benchmark and portfolio structure. At last count, 19% of the SISS portfolio was allocated to private markets. 55% of this $2.83bn exposure as of December 2024 was in infrastructure, 23% was in ‘hybrid/innovative investment’ and 18% was allocated to venture and growth assets.

Ultimately, the change in direction of the SISS winds is part of CalSTRS’ wider net zero ambition. By 2030, America’s second largest pension fund is aiming to reduce emissions from its investment portfolio by 50%. Along the way, the plan is to increase climate solutions allocations – to which SISS and its new private markets focus are closely related.