12 August, 2020

CalSTRS backs new activist hedge fund Impactive with $250 million

(Reuters) – The California State Teachers’ Retirement System (CalSTRS), the second biggest U.S. pension fund said on Monday it designed a $250 million investment with Impactive Capital, an innovative activist hedge fund that expects to get started on trading next month.

CalSTRS, which invests $215 billion on the part the state’s educators, puts money into a handful of hedge funds, typically favoring activists that become liked by them companies that can help boost returns but often work behind the curtain.

“Their compelling strategy aligns together with long-term investment horizon and our resolve for promoting good governance and sustainable business practices that enhance returns for all of our members,” CalSTRS’ Chief Investment Officer Christopher Ailman said about Impactive within a statement.

The investment will heighten the profile of Impactive, founded not too long ago by hedge fund veterans Lauren Taylor Wolfe and Christian Asmar, which enable it to help the pair raise investment capital at a time when activist funds have struggled to draw money as returns sagged.

Last year, the average activist hedge fund lost a standard 11 percent, determined by Hedge Fund Research data.

Taylor Wolfe and Asmar worked together at Blue Harbour Group, another activist hedge fund backed by CalSTRS, and will focus on companies’ environmental, social and governance (ESG) policies besides pushing for better capital allocation and processes.

Traditionally activists prod companies to perform better by buying back shares or spinning off underperforming divisions but an interesting growing center on ESG, like having a wide corporate board and making plans to cut carbon emissions, initiated a policy of to resonate with investors.

Impactive’s Taylor Wolfe and Asmar feature prominently among activist hedge funds to get a woman including a Hispanic in an industry mostly run by white men. Many institutional investors are paying more focus minority owned firms.

CalSTRS is investing with Impactive for six years, roughly 3x longer than the standard hedge fund industry investment. This should allow Impactive to build longer-term investments in companies at the moment when many hedge finance are criticized for pulling their own out too quickly, before real change can be made.

“The length of the CalSTRS investment provides us the flexibility to go looking out into your future more,” Taylor Wolfe said within an interview.