Nearly flat investment returns of 1.8 percent at CalSTRS reflect the highly volatile and challenging global markets of the 2011-12 fiscal year. The return rate is well below the actuarial assumed rate of 7.5 percent and 150 basis points below the policy benchmark, the fund’s performance measuring stick. The CalSTRS Investment Portfolio’s market value for the fiscal year ending June 30 was $150.6 billion.
However, CalSTRS three-year return remains a solid 12.0 percent, given the previous two fiscal years of robust performance. In the 2010-11 fiscal year, CalSTRS posted a 23.1 percent investment return, preceded by a fiscal year 2009-10 return of 12.2 percent. CalSTRS has generated a 7.5 percent return over 20 years. “A year like this one underscores the wisdom of viewing CalSTRS’ performance in the long term and refraining from using one given year’s performance as the gauge for how well the fund is doing,” said CalSTRS Chief Executive Officer Jack Ehnes.
Here are the fiscal Year 2011-12 returns by asset class (numerals in parentheses denote negative values): Global Equity (3.1%); Private Equity 5.9%; Real Estate 9.2%; Inflation Sensitive 4.9%; Fixed Income 7.3%; Total Fund Performance 1.8%. On a longer-term portfolio-wide basis, CalSTRS returns were: 12.0 percent over three years; 0.3 percent over five years; 6.5 percent over 10 years; and 7.5 percent over 20 years. As of June 30, 2012, the CalSTRS investment portfolio holdings were 49.8 percent in U.S. and non-U.S. stocks, or global equity; 18.3 percent in fixed income; 15.0 percent in private equity; 14.5 percent in real estate; 0.6 percent in inflation sensitive and overlay assets; and 1.8 percent in cash.
The California State Teachers’ Retirement System, with a portfolio valued at $150.6 billion as of June 30, 2012, is the largest teacher pension fund and second largest public pension fund in the United States. “This fiscal year has presented a very difficult market for long-term investors like CalSTRS, with wild fluctuations amid ongoing instability in Europe, slowing growth in China and India, a U.S. credit rating downgrade and a sluggish economy,” said CalSTRS Chief Investment Officer Christopher Ailman. “The coming year presents us with many of the past year’s challenges. Short-term speculators risk day trades to time the market but large institutional investors are challenged to generate sustainable returns in such an environment.”