Steady growth in the global equity market fueled a 13.8 percent investment return at the California State Teachers’ Retirement System to close the 2012–13 fiscal year. Despite this performance, CalSTRS still faces long-term funding challenges as a result of setbacks the System incurred during the financial crisis of 2008.
The CalSTRS Investment Portfolio’s market value for the fiscal year ending June 30, 2013 was $165.8 billion. Investment holdings were allocated as follows: 53.3 percent in US and non-US stocks (global equity); 16.8 percent in fixed income; 13.2 percent in private equity; 13.8 percent in real estate; 1.1 percent in inflation sensitive assets; and 1.6 percent in cash.
Returns for this fiscal year shows investment returns well above the actuarial assumed rate of 7.5 percent but just under the System’s policy benchmark of 13.3 percent. Returns by asset class are as follows:
On a long-term, portfolio-wide basis, CalSTRS returns are as follow: 12.6 percent over three years; 3.7 percent over five years; 7.5 percent over 10 years; and 7.5 percent over 20 years.
“These numbers are very encouraging,” said CalSTRS Investment Committee Chairman Harry Keiley. “While we take great pride in the dedication and acumen of our investments staff at CalSTRS, the reality is that even good investment performance addresses only part of the long-term needs of the fund, which suffered a severe setback in the financial crash of 2008.”
Investment returns have been erratic over the past several years. The current performance followed a lackluster year with the fund returning only 1.8 percent in 2011–12, preceded by a 23.1 percent return in 2010–11. As of June 30, 2012, CalSTRS was 67 percent funded with an unfunded actuarial obligation—or funding gap—of $70 billion.
“This year reminds us that a pension fund measures its health over the long term and no single year can take us from underfunding to funding adequacy,” said CalSTRS Chief Executive Officer Jack Ehnes.
The California State Teachers’ Retirement System is the largest teacher pension fund and second largest public pension fund in the United States (www.calstrs.com).
© 2013 PEPD • Private Equity’s Leading News Magazine • 7-16-13
