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The California Public Employees' Retirement System (CalPERS) earned an estimated 19.1 percent return on investments for the 12 months that ended June 30, 2007 – the highest gain in nearly a decade -- to total $247.7 billion.
The percentage gain more than doubled the overall CalPERS assumed rate of return of 7.75 percent, which is required to fund retiree benefits. Total assets increased by $36.5 billion over the year.
“This is good news for our members because these gains will carry many CalPERS plans to 100 percent full funding of our retirement obligations as of June 30, 2007,” said Rob Feckner, President of the CalPERS Board of Administration. “Since investment gains account for 75 cents of every dollar we pay in benefits, these returns represent money saved for employers and taxpayers.”
For the fourth straight year, annual returns were in the double-digits to raise the 10-year average to 9.1 percent. Total assets increased by $128 billion over the past 10 years.
“Almost all of our asset classes returned over 20 percent and we beat our benchmarks on all our major asset classes,” said Chief Investment Officer Russell Read. “Our strategic asset allocation made us well positioned to take advantage of strong capital markets performance, domestically and international. Our investment teams and actions by the CalPERS Board also added significant value.”
The pension fund exceeded industry benchmarks in all major investment portfolios during the 2006-07 fiscal year, topping benchmarks by almost $3.8 billion after taking advantage of developing market opportunities.
CalPERS global equity portfolio (mainly public stocks) returned 23.7 percent overall to beat the benchmark of 22.9 percent. International stocks generated a rate of return of 29.6 percent compared with the benchmark of 30.5 percent. U.S. stocks returned 20.6 percent to eclipse the benchmark of 20.3 percent.
The CalPERS Alternative Investment Management Program*, which specializes in private equity and venture capital holdings, earned 23.3 percent to beat the benchmark of 15.6 percent.
Real estate* returned 20.2 percent overall to top the benchmark of 12.5 percent. Core investments in office, retail, apartment, and industrial assets generated a return of 19.9 percent. Non-core housing, land, and California urban real estate investments returned 20.2 percent.
Total fixed income returned 6.7 percent; the benchmark was 6.0 percent. U.S. fixed income investments gained 7.3 percent to beat the benchmark of 6.5 percent. International fixed income investments were up by 2.3 percent compared with the benchmark of 2.6 percent.
Absolute return strategies garnered a 16.9 percent return to exceed the hedge fund benchmark of 10.4 percent. Corporate governance funds, which invest in under-performing public companies, posted a 24.0 percent return against the benchmark that earned 19.5 percent.
At the end of the fiscal year, 61.3 percent of the CalPERS portfolio was invested in public equity, 23.7 percent in bonds and other fixed income, 8.2 percent in real estate, 6.2 percent in private equity, and 0.6 percent in cash equivalents.
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. It administers retirement and health benefits for approximately 1.5 million current and retired California public employees and their families. For more information on CalPERS, visit www.calpers.ca.gov.
* Real estate and private equity figures are for the 12-months ended March 31, 2007.
