NEW YORK (TheStreet) -- For at least another year, U.S. equities remain an attractive investment, according to Christopher Ailman, CIO of CalSTRS, with the world's largest educator-only pension fund and portfolios valued at roughly $191 billion.
Ailman says he's keeping an eye on global central banks, as the Federal Reserve and Bank of England may be looking to tighten fiscal policy, while the European Central Bank and Bank of Japan are currently easing their monetary policies.
That dynamic has an impact in both the credit and equity markets, Ailman says. While the Fed is considering raising interest rates, he says the likely increase from 0% to just 0.25% is "not that material."
Although the rate hike would signal a shift in direction from the Fed, it just won't have that much of an impact, he added.
As for equities vs. bonds, Ailman says CalSTRS' portfolio consists of roughly 85% equities, a figure that has been trending higher over the past few years. He also includes real estates and private equity among those equity investments.
It's not that it was looking to add risk to its portfolio by buying stocks; it found credit investments as more risky and therefore less attractive, he explained.
Even individual investors should consider a more skewed approach toward equities in its 401(k)s. Perhaps 70% in stocks and 30% in bonds is more appropriate, because even the investor who's 50 years old still has another 30 to 40 years of life ahead of her or him, he reasoned.
It's important that those looking to retire have their investments outpace inflation over the course of the next few decades.
Ailman knows a thing or two about long-term investing, too, considering that his portfolio outlook is around 30 years. The firm's pension investment for the state of California public school teachers covers more than 800,000 teachers, he concluded.
This article is commentary by an independent contributor.