Calstrs Pension2: A Look At Their Investment Portfolio

CalSTRS Pension2 is a voluntary defined contribution plan that offers educators a supplemental savings plan for retirement. The plan provides various investment options, including traditional and Roth 403(b) and 457(b) savings plans, with low fees, tax advantages, and flexible investment choices. The Pension2 Advisory Committee carefully selects and monitors the core funds to ensure the highest quality investment options, placing underperforming funds on a watch list for potential replacement. CalSTRS Pension2 empowers individuals to build their retirement portfolios actively or choose from ready-made portfolios like the Easy Choice Portfolio, catering to different risk tolerances and retirement timelines. With assets totalling approximately $351.5 billion as of September 30, 2024, CalSTRS is the largest educator-only pension fund globally, offering a comprehensive solution for educators' retirement planning.

Easy Choice Portfolios

CalSTRS Pension2 offers three investment options, one of which is the Easy Choice Portfolio. This option is suitable for those who don't have the time or experience to research their plan options. The Easy Choice Portfolio is a ready-made, diversified portfolio that combines risk tolerance and retirement target dates to simplify your investment decisions, whether you are saving for retirement or are already retired.

The Easy Choice Portfolios include five retirement date options that extend beyond 2050 and three risk tolerance levels per date:

• CalSTRS Conservative Portfolio
• CalSTRS Moderate Portfolio
• CalSTRS Aggressive Portfolio

If you prefer to keep it simple and want the convenience of having CalSTRS choose and manage the fund mix, the Easy Choice Portfolio may be a good option for you.

Build your own portfolio

CalSTRS Pension2 is a voluntary defined contribution plan that offers tax-advantaged payroll deductions in low-cost, flexible 403(b), Roth 403(b), and 457(b) plans for additional retirement savings. Pension2 allows you to build your own investment portfolio by choosing from over 20 investment funds that cover different asset classes. This option suits individuals who prefer to manage and adjust their portfolios actively.

When building your own portfolio, it is essential to consider your financial goals, risk tolerance, and time horizon. Diversification is a key aspect of building a robust investment portfolio. By diversifying across different asset classes, you can potentially reduce risk and improve your long-term returns. It is also important to regularly review and rebalance your portfolio to ensure it aligns with your investment strategy and financial goals.

• Define your investment goals: Start by understanding your financial objectives and time horizon. Are you investing for the short-term or long-term? Do you want to generate income, grow your capital, or both? Having clear investment goals will help guide your decision-making process.
• Assess your risk tolerance: Determine how much risk you are comfortable taking. Your risk tolerance depends on various factors, including your age, income, financial obligations, and personal preferences. This will influence the types of assets and investment strategies you choose.
• Asset allocation: Decide how to allocate your capital across different asset classes, such as stocks, bonds, cash, and alternative investments. A well-diversified portfolio typically includes a mix of assets that are not highly correlated, reducing the overall risk.
• Research and select investments: Choose specific investments within each asset class that align with your goals and risk tolerance. Consider factors such as historical performance, fees, investment strategy, and the reputation of the investment manager or fund provider.
• Monitor and rebalance: Regularly review the performance of your investments and make adjustments as needed. Over time, certain assets may outperform others, causing your portfolio to deviate from your desired allocation. Rebalancing involves buying or selling assets to return your portfolio to its intended mix.
• Stay informed: Stay updated on market trends, economic conditions, and investment news. This will help you make more informed decisions and identify potential opportunities or risks for your portfolio.
• Seek professional guidance: Consider consulting a financial advisor or investment professional, especially if you are new to investing. They can provide personalized advice, help you construct a portfolio that aligns with your goals, and guide you in navigating market fluctuations.

By following these steps and staying disciplined in your investment approach, you can build a portfolio that suits your financial needs and goals. Remember that investing involves risk, and the value of your investments may fluctuate over time. It is always recommended to do your own research or consult a qualified professional before making any investment decisions.

Investment watch list

CalSTRS Pension2 is a voluntary defined contribution plan that offers tax-advantaged payroll deductions in low-cost, flexible 403(b), Roth 403(b), and 457(b) plans for additional retirement savings. The CalSTRS Pension2 Advisory Committee selects each of the core funds to ensure the highest-quality investment choices, and these funds are continuously monitored to ensure they meet the performance standards of CalSTRS. If a fund underperforms, it is placed on the investment watch list and may later be removed from the watch list or replaced.

The Pension2 watch list details which of the current investment options are being closely monitored. The funds on this list are evaluated based on specific monitoring criteria, and if they continue to underperform, they will be replaced with new funds.

The Easy Choice Portfolios are a set of ready-made, diversified portfolios that combine risk tolerance and retirement target dates. There are 15 Easy Choice Portfolios to choose from, with five retirement date options extending beyond 2050 and three risk tolerance levels per date. These include the CalSTRS Conservative Portfolio, the CalSTRS Moderate Portfolio, and the CalSTRS Aggressive Portfolio.

In addition to the Easy Choice Portfolios, Pension2 also offers the flexibility to build your own portfolio. You can choose from over 20 investment funds that cover different asset classes, allowing you to create a portfolio that aligns with your time horizon and risk tolerance.

• Federated US Treasury Cash
• Vanguard Total Bond Market
• Vanguard Short-Term Bond Index
• Vanguard Inflation-Protected Securities
• American Growth Fund of America
• Vanguard Institutional Index
• Nuveen Large Cap Responsible Equity
• Vanguard Mid Cap Index
• Vanguard Small Cap Index
• GMO Global Equity Asset Allocation
• Northern Global Sustainability Index
• Artisan International
• DFA International Small Company
• Dodge and Cox International Stock
• Vanguard Developed Markets Index
• Vanguard Emerging Markets Index
• Vanguard Real Estate Index

Real Estate Portfolio

CalSTRS Pension2 is a voluntary defined contribution plan that offers tax-advantaged payroll deductions in low-cost, flexible 403(b), Roth 403(b), and 457(b) plans for additional retirement savings. It is designed to complement the CalSTRS retirement benefit, which replaces about 50% to 60% of a career educator's salary. Pension2 aims to help individuals close the gap between their retirement benefit and their retirement income goal.

The Real Estate Portfolio is one of the investment options available within the Pension2 plan. While specific details about the real estate investments are not publicly available, CalSTRS does provide information on its broader investment philosophy and performance measurements. CalSTRS takes a long-term approach to investing, seeking to buy long-term net cash flows and capital gain potential at a reasonable price. Their investment strategy is guided by sustainability practices that promote long-term value creation, responsible investment, and stewardship of natural resources.

The Real Estate Portfolio's performance is regularly assessed and reported, ensuring transparency and allowing individuals to make informed decisions about their investment choices. CalSTRS also offers resources such as videos and calculators to help individuals understand their retirement goals and how Pension2 can help them achieve those goals.

In addition to the Real Estate Portfolio, Pension2 offers a range of investment options, including various mutual funds, U.S. large-cap and small/mid-cap stocks, international and emerging market funds, and more. Individuals can choose from different enrollment choices, such as the Easy Choice Portfolio, where CalSTRS manages the fund mix, or the Self-Directed Brokerage Account for those who prefer to build and manage their own portfolio.

Sustainable investing

CalSTRS Pension2 is a voluntary defined contribution plan that offers tax-advantaged payroll deductions for additional retirement savings. It complements the CalSTRS retirement benefit and features low fees and expenses, tax-advantaged contributions, and a variety of investment plans.

• Sustainable Investment: Allocating capital to investments that deliver financial performance and create positive environmental, social, and governance outcomes.
• Stewardship: Using their influence as a significant global investor to promote sustainable business practices and public policy.
• Strategic Relations Management: Maintaining the trust of the members served and their position as a respected leader in the investment industry.

CalSTRS believes that climate change is one of the greatest threats to the future, impacting health, safety, the environment, and the global economy, which puts the CalSTRS Investment Portfolio at risk. The organisation engages with publicly traded companies to support long-term value creation and mitigate risk to its portfolio and the financial market as a whole.

Frequently asked questions