HONG KONG : The California State Teachers' Retirement System (CalSTRS), the second-largest U.S. pension fund, said on Tuesday it had shortlisted 19 fund managers for its China stock portfolio.

"We have identified 19 managers for our China public equity pool. Placement in this pool does not guarantee a manager will receive an allocation," the firm said a statement to Reuters that did not disclose the names of the managers.

It said actual allocation sizes to the selected managers would be decided on factors including CalSTRS' needs and the overall attractiveness of the Chinese market.

CalSTRS floated a request for proposal (RFP) last August kicking off its search for China-focused fund managers, Reuters reported previously.

The pension fund had roughly $3.7 billion worth of investments in Chinese equities around that time, but did not have a dedicated China manager. CalSTRS had global assets worth around $309.3 billion at the end of May.

The news of CalSTRS' shortlisting of candidates for its China stock portfolio comes amid rising bullish bets on Chinese markets, as investors pin hopes on further stimulus measures by Beijing to revive the world's second-largest economy.

The MSCI China index dropped 23 per cent and 24 per cent, respectively, in 2021 and 2022, and is almost flat year-to-date, largely underperforming global peers.

CalSTRS said that a dedicated China manager could provide "more specialized expertise" on the environmental, social and governance aspects of the China market, compared to a broad global emerging markets approach.

It did not disclose a timeline for selecting the winning candidates.

The RFP was initiated last year "to find out if there may be a better way" to implement its existing China equity exposure, the pension fund said in September.

As part of that plan, CalSTRS was prepared to establish three investment strategy categories targeting China, according to the RFP posted on its website.

Two would focus on Greater China equities and onshore Chinese shares, with the third benchmarked to the MSCI China index, according to the RFP.

US pension fund CalSTRS shortlists candidates for China stock portfolio