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CalSTRS returns 1.8% in fiscal year

Christopher Ailman

CalSTRS returned 1.8% for the fiscal year ended June 30, said Christopher Ailman, chief investment officer, at a meeting Thursday of the $146.8 billion system’s investment committee.

The small return is a blow for the California State Teachers’ Retirement System, West Sacramento, which has a 7.5% assumed rate of return. It also is still recovering from the deep financial blow sustained in the 2008-‘09 fiscal year, when it lost 25% of its assets.

Gains and losses by asset class were not immediately disclosed, and the retirement system’s current funded status is unclear. As of June 11, 2011, the system’s funded status was 69%.

“We like to bat a thousand; we didn’t,” Mr. Ailman said, telling the board that the fiscal was one of the most challenging he had faced in his professional life.

He said stock market volatility and a low-interest fixed-income environment, which Mr. Ailman described as the worst he’s ever seen, had contributed to the tepid returns.

Mr. Ailman conceded that the system would have to step up the pace in coming years. “It’s a marathon, not a sprint,” he said.

He said macro economic forces were affecting returns, and while the system could make changes in the margins, the overall effect might be limited.

Mr. Ailman told the board that two of eight managers in the $3 billion corporate governance class would be terminated because of poor performance. He did not name the managers or say when they would be cut.

He added that managers in that asset class often invest in underperforming companies that could take several years to turn around. In the meantime, returns could be affected, he said.