CalSTRS CIO outlines ‘portfolio resiliency’ approach amid geopolitical and tariff risks

Scott Chan, CalSTRS chief investment officer, framed the committee’s investment work around “portfolio resiliency,” telling members that the fund is emphasizing four pillars — diversification, cash and liquidity, dynamic asset allocation and investment staff/partners — to withstand potential geopolitical and macro shocks.

“Like Pandora’s box, I would say opening it is unleashing unintended and some unpredictable consequences,” Chan said as he described how a mix of tariffs and deglobalization could produce market stress. He repeated the fund’s long‑term objective to deliver retirement security for California educators and said the system’s planning and scenarios account for recessions and past crises (SEG 1100–1130, SEG 1216–1224).

When a trustee asked where the fund is holding increased liquidity, Chan said the cash buffer is mainly in short‑term government‑backed securities that are “better safe as can be,” and noted those short yields were on the higher side (approximately 4.5% in the discussion, SEG 1278–1280). He said the fund has also slowed private markets pacing and increased diversifying fixed‑income exposure to preserve optionality.

Chan and staff then reviewed the risk picture — from deglobalization and tariff‑driven uncertainty to the fiscal deficit and the potential re‑pricing of U.S. assets — and said the objective now is preparation and scenario‑based planning, not immediate structural changes to the asset allocation (SEG 1290–1410).

The presentation closed with a reminder that the investment office has increased staff to support underwriting and that the committee will continue scenario work at future sessions, including the July off‑site.

Board members thanked staff for the briefing and directed staff to provide follow‑up material on scenario analyses, liquidity holdings and related risk metrics.