The board of the California State Teachers’ Retirement System (CalSTRS) met Wednesday to reconsider whether it should invest in tobacco companies.

But it decided to postpone making a decision for a future meeting once its staff provides more information on the risks of making an investment in the tobacco industry again.

Eight years ago, the second-largest pension fund in the United States sold its US$238 million worth of tobacco stocks because the sector had a large exposure to legal judgments with overwhelming punitive damage awards and there was a significant threat of industry-wide bankruptcies. The California Public Employees’ Retirement System, which is the largest pension fund in the U.S., sold its holdings in the sector around the same time.

However, both funds missed out on some large gains. Since the end of 2000, an index of tobacco companies has jumped nearly 300% while the S&P 500 has gained 21%.

Large Canadian funds haven’t shied away from investing in the sector. According to filings with the Securities and Exchange Commission, the Caisse de dépôt et placement du Québec, the Ontario Teachers’ Pension Plan, and the Canada Pension Plan Investment Board (CPPIB) all reported holding tobacco companies traded on U.S. exchanges at the end of March 31, 2008.

The Caisse held $24.6 million in tobacco stocks, which was comprised of 268,850 shares of Altria, 35,000 shares of Carolina Group, and 318,850 shares of Philip Morris International.

Teachers’ owned 872,594 shares of Altria, which was worth $19.4 million, and held 7,772 shares of Loews Corporation—whose subsidiary is Carolina Group—which was worth $313,000.

Among the three, the CPPIB held the largest amount of tobacco stocks at the end of the first quarter. It held more than 3.23 million shares in Altria, worth $75.6 million; 319,354 shares of Carolina Group, worth $24.4 million; and 249,162 shares of Reynolds American, worth $15.5 million. The CPPIB also owned 547,729 shares of Loews Corporation, worth $23.2 million.

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