By Svea Herbst-Bayliss
The California State Teachers' Retirement System (CalSTRS), the second largest U.S. pension fund said on Monday it made a $250 million investment with Impactive Capital, a new activist hedge fund that expects to start trading next month.
CalSTRS, which invests $215 billion on behalf of the state's educators, puts money into only a handful of hedge funds, typically favoring activists that engage with companies to help boost returns but often work behind the scenes.
"Their compelling strategy aligns with our long-term investment horizon and our commitment to promoting good governance and sustainable business practices that enhance returns for our members," CalSTRS' Chief Investment Officer Christopher Ailman said about Impactive in a statement.
The investment will raise the profile of Impactive, founded last year by hedge fund veterans Lauren Taylor Wolfe and Christian Asmar, and may help the pair raise capital at a time when activist funds have struggled to attract money as returns sagged.
Last year, the average activist hedge fund lost an average 11 percent, according to Hedge Fund Research data.
Taylor Wolfe and Asmar worked together at Blue Harbour Group, another activist hedge fund backed by CalSTRS, and plan to focus on companies' environmental, social and governance (ESG) policies in addition to pushing for better capital allocation and operations.
Traditionally activists prod companies to perform better by buying back shares or spinning off underperforming divisions but a recent growing focus on ESG, like having a diverse corporate board and taking steps to cut carbon emissions, has started to resonate with investors.
Impactive's Taylor Wolfe and Asmar stand out among activist hedge funds for being a woman and a Hispanic in an industry mostly run by white men. Many institutional investors are paying more attention to minority owned firms.
CalSTRS is investing with Impactive for six years, roughly three times longer than the average hedge fund industry investment. This will allow Impactive to make longer-term investments in companies at a time when many hedge funds are criticized for pulling their money out too quickly, before real change can be made.
"The length of the CalSTRS investment gives us the flexibility to look out into the future a little more," Taylor Wolfe said in an interview.