The California Public Employees’ Retirement System (CalPERS) today reported an 11.4 percent return in preliminary estimates for the one-year period that ended June 30, 2010.
The upturn for the 2009-10 fiscal year exceeded the long-term annualized earnings target of 7.75 percent, which CalPERS has attained over the past 20 years.
“The positive returns over the last year are due to many factors, including the stabilization in the financial industry and the increase in market liquidity,” said Joe Dear, CalPERS Chief Investment Officer. “Many asset classes have exhibited strength amid signs of stabilization and recovery in the economy.”
As of June 30, 2010, the market value of assets stood at $200.0 billion.
“With the exception of real estate, all of the asset classes had positive returns for the year,” Dear said. “We’re definitely in the recovery mode with the opportunity to capture future returns because of our long-term investment horizon. We’re making good progress as we apply the hard lessons of the financial crisis to improving our investment policies, processes and strategies.”
The CalPERS Board, investment staff and outside consultants are developing a new plan beginning in 2011 for how to allocate capital in public stocks, private companies, bonds and other fixed income, real estate and inflation-linked assets like commodities, infrastructure and forestland.
CalPERS has saved $100 million in fee reductions with external managers, has eliminated low-performing funds from its portfolios and is developing new risk management tools. It also successfully advocated several federal financial market regulatory reforms aimed at protecting investors, consumers and the economy from future financial crises.
Today’s announcement includes market value of asset changes as follows: global fixed income, up 19.5 percent; private equity, up 30.9 percent; public stocks, up 14.4 percent; commodities, infrastructure, forestland and inflation-linked bonds, up a combined 2.7 percent; and real estate, down by 37.1 percent. The real estate dollar loss was equivalent to 1.3 percent of the total CalPERS market value.
“Real estate declines reflect write-offs and deleveraging a portfolio that relied too heavily on borrowing at the peak of the bubble in 2005 and 2006,” Dear said. “Our new real estate team has been completely restructuring 24 separate accounts. We’re moving back into core properties and accepting managers in whom we have confidence. We’re letting go underperforming managers and looking for the best possible deals as they become available in a still sluggish market.”
Returns for real estate, private equity and some components of the inflation-linked class reflect market values through March 31, 2010 (not June 30, 2010). Final performance including the last quarter of the fiscal year will be available after asset valuations are completed.*
Employer rates that use FY 2009-10 investment performance will be calculated based on audited figures. CalPERS uses audited returns after fees to determine future employer contributions.
For information on CalPERS history of investments read Facts at a Glance – Investments at www.calpers.ca.gov.
CalPERS is the nation’s largest public pension fund, administering retirement benefits for 1.6 million active and retired State, public school, and local public agency employees and their families and health benefits for 1.3 million members.
*Returns for real estate, private equity and some components of the inflation-linked asset class are for 12 months ending March 31, 2010 and are subject to change. Pending appraisals in the real estate portfolio will also affect final year-end data.