A little over a year ago, the California State Teachers’ Retirement System committed $200 million to an emerging markets strategy from ABS Global Investments — its first commitment to the manager of managers. Now, that mandate has expanded into a more integrated partnership between the two entities where the emerging markets specialist serves as a consulting partner to the $408 billion pension plan’s global equity team.
ABS now functions as a specialist extension of CalSTRS’ investment office, contributing directly to the evaluation of country exposures, manager selection, and portfolio construction decisions.
“We’re not a standard manager of managers,” co-founding partner and portfolio manager Guilherme Valle told Institutional Investor. “We are finding managers that are on no one’s radar. They’re not in eVestment. They’re not in Morningstar. They’re not on the radar of any major investment consultant.”
ABS finds and vets the managers, structures the accounts and designs the guidelines. “We use local hedge fund managers to manage those long-term accounts. We have the data and monitor them on a daily basis,” Valle said, adding that with ABS and the managers each charging their fees, CalSTRS’ investment committee would not approve an expense ratio that high — no matter how compelling the returns.
Founded in 2002 as a fund of funds, ABS invests through a network of locally based specialist managers (it launched its first dedicated emerging markets strategy in 2017). By partnering with local specialists that have on-the-ground expertise in its stock selection, ABS can provide differentiated returns by uncovering unique names, particularly in the small- and mid-cap space, according to Valle.
CalSTRS has historically accessed emerging markets through large, diversified managers. When ABS was initially introduced to the California teachers’ pension, it was as a dedicated country specialist serving a distinct allocation within the portfolio. But according to Jon Feinberg, managing partner and head of distribution of ABS, CalSTRS wasn’t just interested in performance: It wanted access to ABS’ network of locally based managers across regions.
“CalSTRS was interested in our returns but not overwhelmed,” Feinberg said. “From the get-go I said we’re a different firm. We have a system called ‘The ABSolute’ that captures all our calls, emails, and analyses. The alpha will come from different places. That led to more conversations.”
Feinberg explained: “It was more about the process, the vetting, and the ability to call a manager in China, and have a partner based in China transcribe in real time what’s going on to their investment staff.”
While both ABS and CalSTRS focus on manager selection, they operate at different points in the process, which has expanded ABS’s role within CalSTRS’ ecosystem from an external mandate into a consulting partner to the global equity team.
The teams have also held a series of workshops over the past year focused on how ABS evaluates managers across qualitative, operational, and quantitative dimensions. These granular discussions have covered how to assess team stability and edge, interpret performance across cycles, evaluate factor exposures, and determine when to initiate, size, or exit manager positions. The conversations have focused on decision-making frameworks and trade-offs rather than performance outcomes.
ABS provides regular emerging markets reviews with targeted country-level perspectives that serve as a consistent input into CalSTRS’ thinking between formal meetings, informing discussions around exposures, positioning, and manager evaluation.
The relationship has also expanded beyond emerging markets: ABS contributes data and analysis that have been incorporated into CalSTRS’ internal public equity framework and, in some cases, referenced in external discussions, including perspectives on local versus regional manager structures. The pension’s initial $200 million commitment has grown to $661 million as of the end of March.
Valle expects to see more partnerships between specialist managers and large allocators as more institutions seek niche managers in global and emerging markets.
“We’re talking to other large state plans interested in GEM,” he added, referring to ABS’ global emerging markets strategy and its small-cap and less-benchmark-aware versions.
