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CalSTRS creates Total Fund Management division to coordinate liquidity, pacing and risk
Summary
CalSTRS announced a new Total Fund Management (TFM) division to centralize liquidity, pacing and risk budgeting, with three committees (RAC, liquidity and pacing) and a nine-person team tasked with improving total-fund risk-adjusted returns.
At the Jan. 8 Investment Committee meeting, CalSTRS introduced a new Total Fund Management (TFM) division that centralizes liquidity management, pacing and risk-budgeting functions for the total fund. June Kim, senior director of the division, said the unit will coordinate across asset classes to improve risk-adjusted returns and to provide a single point for liquidity planning and balance-sheet management.
Kim described three core TFM functions: risk management, asset allocation and portfolio construction, and enhanced balance-sheet management. The unit brings together existing workstreams — the Risk Allocation Committee (RAC), a newly formed liquidity committee (led by Geraldine Jimenez) and a pacing committee (led by Mike DeRae) — and aims to integrate them with more centralized processes and improved data flows.
Josh Dedish, senior portfolio manager in TFM, said the team will expand risk reporting and risk budgeting capabilities and will incorporate liquidity projections and pacing information into annual allocation planning. "We want to understand where risk is taken at a detailed level and make sure the fund is being compensated for that risk," Dedish said.
Staff said TFM is a continuation of work already underway, not a wholesale change in investment strategy. The division will initially operate with a small team (about nine staff) and is expected to evolve as the fund's private-market allocations and liquidity needs grow. The division's goals include lowering inefficiencies, better coordinating capital between public and private asset classes and creating tools to capture additional total-fund alpha.
Directors asked whether the new structure represents a cultural shift for staff; presenters said the change formalizes collaboration and centralizes coordination while preserving specialized teams for asset-class expertise. The committee will receive future education sessions, demonstrations of new reporting tools and follow-up proposals as the division builds out its capabilities.
