The investment portfolio of the California Public Employees’ Retirement System (CalPERS) is showing signs of steady growth according to a quarterly report delivered to the pension fund’s Board today.
CalPERS assets stood at nearly $198 billion at the end of the third quarter, according to the report delivered by the Board’s investment consultant Los Angeles-based Wilshire Associates.
Today, assets stand at more than $200 billion – a $40 billion gain over CalPERS low of $160 billion in March 2009 during the market’s downturn.
“We are seeing some strong signs of economic growth that are having a positive impact on the value of our portfolio,” said Joseph Dear, Chief Investment Officer for CalPERS. “While we are still cautiously optimistic, we are seeing some light at the end of the tunnel.”
The report said that CalPERS growth was aided by a number of factors including the fund’s exposure to U.S. and international equity and corporate governance investment funds that seek to turn around ailing public companies.
For the quarter ending September 30, 2009, CalPERS U.S. equity investments returned 16.7 percent, while its international equity investments earned 20.7 percent. Investments in corporate governance funds saw a 16.6 percent return for the quarter and fixed income assets drew nearly 9 percent.
Investment declines in real estate and private equity continued to weigh on CalPERS overall performance. The fund’s real estate assets declined by more than 30 percent for the quarter and 49 percent for the one-year period ended June 30, 2009 as the economic downturn took its toll on all real estate assets and investors.
CalPERS Alternative Investment Management (AIM) program – or private equity investments – reported a decline by more than 24 percent for the one-year period ended June 30, but showed positive signs of growth for the quarter ended June 30 earning a 7.4 percent return. CalPERS AIM program has outperformed its internal benchmarks for the 3, 5 and 10-year periods that are established to meet the pension fund’s long-term benefit obligations.
Since inception of the program in 1990, the AIM portfolio has generated $14.4 billion in profits for CalPERS.
(CalPERS real estate and private equity returns reported lag one quarter and represent performance through June 30, 2009.)
“We have taken a number of steps in our real estate portfolio to reduce leverage, reduce risk, and reposition our investment partnerships for long-term growth,” added Dear. “We are also reviewing our relationships with our private equity partners that can lead to reduced fees, better alignment of interests, and more mutually beneficial long-term relationships,” he said.
“In the meantime, we have seen significant write-ups in our private equity investments that are expected to increase performance in the coming months. Over time, our real estate and private equity investments will fuel our portfolio in future years when we see a full recovery in the financial markets.”
In May 2009, the CalPERS Board revised the fund’s asset allocation to position the Fund to take advantage of market opportunities.
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. For more information, visit www.calpers.ca.gov.