A New Dawn for Institutional Investors?

When the California State Teachers’ Retirement System lowered its assumed annual rate of return in January for the second time in a little over a year, something was obviously afoot. The $144.8-billion fund’s board of directors agreed to cut its target expected return from 7.75% to 7.5%. The move comes more than a year after the board was asked to make an even more drastic rate cut, from 8% to 7.5%, in December 2010, but the action was deemed too severe at the time.

Once upon a time, institutional investors like pension funds and insurance companies had been notoriously slow to adapt to real-time, changing market environments. That attitude is becoming a luxury that few can now afford.