CalSTRS says private‑market strategy saved $2.0 billion since inception; 2023 costs fell 12%

CalSTRS staff presented the 2023 annual cost and collaborative model savings report to the Investment Committee, saying the program has delivered meaningful savings while maintaining the fund’s focus on net returns.

Staff reported that overall costs fell 12% in 2023. Mike Dunnigan, CalSTRS associate portfolio manager, told trustees the decline was driven largely by a 35% reduction in carried interest paid as fewer private‑market exits occurred. "Costs overall decreased for the first time in 5 years," he said, and noted that portfolio management fees rose slightly as private allocations and internal management increased.

April Wilcox, director of investment services, described the combined cost and collaborative model report and said the review covers data back to 2017. The collaborative model — which brings more assets in‑house and uses co‑investments and low‑cost joint ventures — saved $363,000,000 in 2023 and $2,000,000,000 since the program began, staff said.

Shefad Hassan, head of investment performance and compliance, said the fund’s capture ratio (net returns relative to gross) improved to 91.9% in 2023 as less carry was paid. Independent consultants and trustees praised the report’s transparency and said the bulk of savings historically comes from private‑market co‑investments and joint ventures.

Why it matters: The savings reduce frictional costs borne by the fund and can meaningfully affect long‑term net returns for CalSTRS’ beneficiaries. Staff emphasized that some components, notably carried interest, are volatile and tied to exit activity, so year‑to‑year figures can fluctuate.

What’s next: Staff will continue phased reviews of operational infrastructure and asset‑class structures; the committee discussed long‑term (7–20 year) horizons for realizing the strategic benefits of the new model.