The $188.7 billion California State Teachers’ Retirement System plans to form a new subcategory within its core real estate allocation, according to a revision of the CalSTRS Real Estate Policy presented at its June investment committee meeting.

CalSTRS plans to add a “transitional-core” sub-asset portfolio and remove the specific individual asset leverage test. According to the presentation, the changes are consistent with the rules applied by the NCREIF Fund Index for the core funds that make up the NFI-ODCE, which serves as the benchmark for CalSTRS’ real estate portfolio.

The changes, also recommended by The Townsend Group, “reflect the advancements in de-risking the real estate portfolio and are consistent with industry evolution and practice,” according to a memorandum from the consultant. The inclusion of these transitional-core assets is limited to no more than 20 percent of CalSTRS’ core portfolio, which has an allocation target of 60 percent of