CalSTRS was named a Best Place to Work in Money Management for 2017 by Pensions & Investments magazine. This year’s honor is the third CalSTRS has garnered—the only public pension plan to do so. They could cinch a fourth such honor by surveying member values.
Pensions & Investments, a global news source for money management, created the survey and award program, which is dedicated to identifying and recognizing the best employers in the money management industry.
Reaction From CalSTRS CIO Christopher J. Ailman
This recognition reflects all the hard work our board, staff and leadership have done. We employ the best investment officers in the country. Our people and our culture demonstrably produce some of the best results in terms of low cost, efficient investment performance, among all large U.S. pension plans. Our 160 Investments Branch staff are among the most valuable assets in CalSTRS and this award validates our team effort.
We balance the demands of managing a huge pool of assets in a global financial system with those of our employees’ work and life realities. The fact that we accomplish this at a high level within a governmental structure is indicative of the grit and ingenuity of our leadership and Investments staff.
Mr. Ailman firmly believes that recruiting and retaining top talent requires providing stimulating work and a closely knit culture. Senior investment leadership is 55 percent female. Opportunities at CalSTRS Investments continue to grow as more assets are managed in-house and an Innovation Unit continues to explore new investment strategies. CalSTRS is also implementing an asset allocation strategy that moves more assets from a home-country bias to a more global orientation.
“We appreciate Pensions & Investments’ recognition of the strength that embracing a diversity of ideas and people has had on our work environment,” Mr. Ailman added.
About the Survey
Pensions & Investments worked with Best Companies Group, an independent research firm specializing in identifying great places to work, to conduct a two-part survey process for employers and their employees.
The first part consisted of evaluating each nominated company’s workplace policies, practices, philosophy, systems and demographics. This part of the process comprises approximately 25 percent of the total evaluation. The second part consisted of an employee survey to measure the employee experience. This part of the process comprised approximately 75 percent of the total evaluation. Combined scores determined the top companies.
The California State Teachers’ Retirement System, with a portfolio valued at $219.6 billion as of October 31, 2017, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California’s more than 914,000 public school educators and their families from the state’s 1,700 school districts, county offices of education and community college districts.
See how CalSTRS demonstrates its strong commitment to long-term corporate sustainability principles in its annual Global Reporting Initiative sustainability report: Global Stewardship at Work
Follow CalSTRS on Twitter @CalSTRS
CalSTRS Could Do Even Better With Survey Research
CalSTRS should find it easier to attract top talent than most public pensions. The average member probably has a master’s degree. This is a very intelligent bunch. The Board should look to the test of Article 2.5 Uniform Prudent Investor Act.
This is basically the current standard fiduciaries should be following. Subdivision 16047 sets out the usual prudent investor considerations, such as economic conditions, tax consequences, expected total return, needs for liquidity, etc. The most interesting consideration is that in subdivision (c)(8):
An asset’s special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries.
What “special value” does any specific investment have to one or more CalSTRS beneficiaries? Here, the Board should not just be looking at money or the pension itself, but other benefits that fiduciaries are obligated to consider and to provide. These could include clean air, clean water, healthy food, efficient public transportation, continuing education, a healthy local economy to grow old in, etc.
CalSTRS is doing a great job on environmental, social and governance (ESG) issues but could do better by surveying members. Such surveys would serve multiple duties. They would educate members as to the fact that CalSTRS trustees have a fiduciary duty to consider such special value benefits when making investments.
They would also help pension fund trustees determine which are most important to members and would offer something of a shield to fund managers. If questioned as to why they made a specific investment (or divestment), survey results would help defend the fund’s actions. “We surveyed our members and ninety percent of respondents ranked xyz as a high priority.”
Finally, such surveys could further incentivize employees. Even Forbes, the “capitalist tool,” reports employees are not just there for them money. Millennials especially want to work for mission driven employers.
Such surveys would undoubtedly show that CalSTRS members place a greater importance on corporate responsibility. If you spend your day protecting and educating children, you probably don’t want your pension fund investment fighting against those values. CalSTRS already has a robust stakeholders group but gathering feedback potentially from all members on “special values” and even the general public could take value alignment and fiduciary duty to the next level.