CalSTRS considers hiring China-focused equity managers for first time

HONG KONG, Sept 13 (Reuters): The California State Teachers' Retirement System (CalSTRS) is looking at appointing China-focused equity managers for the first time ever, as demand for asset diversification grows amid worries on inflation and recession.

CalSTRS had roughly $3.7 billion worth of investments in Chinese equities at the end of June through both internally and externally managed strategies, the No.2 US pension fund said in a statement to Reuters.

The fund floated a request for proposal (RFP) last month for fund managers with a plan to establish new investment categories targeting Chinese equities. Interested funds were required to respond to the proposal by Oct. 10.

The purpose of taking proposals from China-focused managers is "to find out if there may be a better way" to implement the existing China equity exposure, the pension manager said in the statement.

CalSTRS' plan comes as asset allocation to Chinese equities by deep-pocketed US institutional investors has been stagnant overall for the past few years due to rising geopolitical tensions.

Some of Asia's large China-focused hedge funds are also buying more non-China stocks as regulatory scrutiny, policy uncertainties and a slowing mainland economy force them to cut exposure to offshore Chinese assets.

Recent moves by some big investors, however, suggest that they are seeking asset and geographical diversification as the western world grapples with tighter Federal Reserve policy and an energy crisis in Europe, according to industry insiders.