SACRAMENTO, CA – The California Public Employees' Retirement System (CalPERS) announced today that it earned a 12.3 percent return on investments for the one-year period ended June 30, 2006, before investment management fees.
The pension fund generated approximately $8 billion more in returns than it would have generated from its assumed rate of return of 7.75 percent – an annual target necessary to pay future member pension benefits.
It marks the third straight year the pension fund earned double-digit returns. The System's average annual investment return over the last 10 years is 9.2 percent.
"Our annual performance figures represent dollars saved for public employers and employees since investment returns pay $3 of every $4 of our members' pensions," said Charles P. Valdes, Chair of CalPERS Investment Committee. "Our diversified portfolio helped us weather what has been a volatile domestic public equity market in recent months, with strong performance again in real estate, international stocks and private equity."
The pension fund exceeded industry benchmarks in five of eight major investment portfolios during the 2005-06 fiscal year. Investment staff added approximately $2.8 billion to the fund mainly by taking advantage of developing market opportunities.
CalPERS real estate portfolio* was the biggest percentage gainer among asset classes, returning 38.4 percent for its investments in office, retail, apartment, and industrial assets, and 36.5 percent for housing, land, and California urban real estate investments. By comparison, the NCREIF industry benchmark earned 20.2 percent.
International stocks generated the second-highest rate of return of approximately 27.2 percent, just short of the benchmark of 27.7 percent, while domestic stocks earned 9.6 percent, beating the benchmark of 9.5 percent.
The System's Alternative Investment Management Program*, which specializes in private equity and venture capital holdings, earned 19.2 percent compared with a benchmark of 18.6 percent, while absolute return strategies garnered an 11.6 percent return, exceeding the hedge fund benchmark of 8 percent.
CalPERS corporate governance funds, which invest in under-performing public companies, posted a 17 percent return compared to a benchmark that earned 20.3 percent.
U.S. fixed income investments lost 1.2 percent, compared with a benchmark that lost more than 3 percent. International fixed income investments lost less than 1 percent, while the benchmark gained less than two-tenths of one percent.
At the end of the fiscal year, 68 percent of the CalPERS portfolio was invested in public equity, 22 percent in bonds and other fixed income, and 5 percent in real estate and 5 percent in private equity.
The performance figures represent an estimated return. CalPERS will use a different, audited return, net of fees, to determine future employer contributions. While employee contributions are relatively fixed, employer contributions vary to make up the difference between total contributions and investment returns to ensure funding of the System.
CalPERS is the nation's largest public pension fund with assets of more than $208 billion. It administers retirement and health benefits for more than 1.4 million current and retired California public employees and their families, and more than 2,500 California public employers. For more information on CalPERS, visit www.calpers.ca.gov.
* Real estate and private equity figures are 12-months ended March 31, 2006.
