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CalPERS Chief Investment Officer Mark Anson reported that $22.7 billion in value was added to the fund, of which $2.3 billion was generated by taking advantage of unique market opportunities this past year. It set a record for special efforts taken by the Fund’s investment staff.
CalPERS performance should provide hope to the state and local public employers who are responsible for making contributions to fund the benefits. It may help to reverse the past trend of rising employer contribution rates, which was caused by three years of low to negative investment returns. While no employer will see the effect immediately, the 2003/04 fiscal year returns will factor into rates that will be set for the 2005/06 and 2006/07 fiscal years.
“We beat our benchmarks in four out of five asset classes, and did so while managing our risk and navigating through the ups and downs of the market last year,” said Anson.
The System’s top performing portfolio was its investments in corporate governance funds. They earned the System an unprecedented 53.5 percent return.
CalPERS U.S. stock investments returned more than 20.8 percent, exceeding the Wilshire 2500 benchmark of 20.5 percent.
The Fund’s fixed income investments also performed well, earning the System more than $900 million in additional value. International fixed income investments gained 8 percent, compared with its Salomon Brothers World Government Index benchmark of 7.6 percent, while U.S. fixed income investments earned 1.4 percent, compared to the Citigroup Large Pension Fund index that lost more than one-half percent.
Assets of CalPERS Alternative Investment Management Program, which specializes in private equity holdings, grew by 12.7 percent, exceeding its 9.7 percent benchmark. The private equity program has generated $6 billion in profits since inception, $1 billion in the 2003-04 fiscal year alone.
CalPERS investments in real estate, which are largely office, retail, apartment and industrial assets, gained nearly 12 percent. The System’s investments in housing, timber and other specialized real estate assets earned 23.5 percent. Both portfolios greatly exceeded the standard real estate index, the NCREIF Property Index which earned 9.7 percent.
Particularly strong performers in real estate this past year were senior housing, which yielded a 46.9 percent return, housing - 31.3 percent return, retail - 24.3 percent return, and apartments - 22.6 percent return.
International stocks performed well earning a return of 30.9 percent, less than the System’s benchmark of 31.7 percent. Absolute return strategies, or hedge funds, had a 9.8 percent return, falling short of a benchmark that return 14 percent.
As of June 30, 2004, 67 percent of the CalPERS portfolio is invested in equities, 26 percent in bonds and other fixed income and 7 percent in real estate.
CalPERS is the nation’s largest public pension fund. The System provides retirement and health benefits to more than 1.4 million State and local public employees and their families. For further information on CalPERS, please visit the System’s web site at www.calpers.ca.gov.
