CalSTRS Investment in California Tops $2 Billion; Program Targets Underserved Urban and Rural Communities, Promotes Economic Growth in State

Business Wire, August 26, 2003

Business Editors/Education Writers

SACRAMENTO, Calif.--(BUSINESS WIRE)--Aug. 26, 2003

The California State Teachers' Retirement System has surpassed the $2 billion mark for investing in the state's urban and rural communities to help promote economic growth.

As of June 30, CalSTRS investments in these communities totaled $2.08 billion, or more than 2 percent of the system's approximately $100 billion pension fund. This milestone is the first time CalSTRS has exceeded its goal of putting 2 percent of its investment into California's emerging communities.

"Reaching this target helps our members as well as all Californians," said Christopher Ailman, chief investment officer of CalSTRS. "We are investing to help promote a better economic future for the state while generating solid returns for the fund."

The California investments principally were in credit enhancements, stocks, real estate, mortgage-backed securities and home loans. Ailman said credit enhancements are financial instruments that enable CalSTRS to "lend" its strong credit rating to community development project bonds in exchange for a fee.

Examples of such projects include: the California Housing Finance Authority, the Port of Long Beach, the Irvine Unified School District, the City of Vallejo, Kern High School, the San Francisco Conservatory of Music, the Pasadena Rose Bowl and Mission Viejo.

"Credit enhancements are an excellent way for community projects to obtain lower-cost financing, which eases the strain on local budgets," Ailman said. "And CalSTRS benefits by generating fee revenues for our investment portfolio."

CalSTRS has also targeted underserved areas in California. Examples of these include a $125 million revitalization project for Hollywood, backed by a fund headed by former basketball superstar Earvin "Magic" Johnson; and industrial development funding to support a toy and gifts manufacturing facility that will create new jobs in Los Angeles.

Because of the program's performance to date, CalSTRS is considering raising its state rural and urban investment target above the 2 percent mark.

CalSTRS's overall investment in California is conservatively estimated at about $13 billion. The fund has more than $2.7 billion invested in companies that are either headquartered or have major operations in the state, including Intel Corp., Wells Fargo & Co., Cisco Systems, Chevron Texaco, Hewlett-Packard, Oracle and The Walt Disney Company.

Ailman said that the CalSTRS investment in California is probably even more extensive than calculated, because it is hard to gauge the cumulative impact of investing in other national and even international companies that have operations here.

"Even non-U.S. companies such as Nestle, Nokia and Royal Dutch Petroleum have significant business activity in the state," Ailman said. "That translates into investment in the communities where their employees work and live."

CalSTRS administers retirement, disability and survivor benefits for California's public school educators in grades kindergarten through community college, serving more than 715,000 members and benefit recipients.