CalPERS funded status falls 4 percentage points in 2016 fiscal year

Nation’s largest pension fund also reports cutting manager lineup by 25%

CalPERS in its latest fiscal year saw its funded status drop to 69% as of June 30 from 73.1% a year earlier, shows the Sacramento-based pension fund’s comprehensive annual financial report.

The pension fund’s performance for fiscal year ended June 30 was 0.61%, the fund’s lowest investment return since the financial crisis.

The CalPERS board last month approved lowering the pension fund’s assumed rate of return to 7% from 7.5%.

The annual report also shows that CalPERS reduced its number of external managers by almost 25% in the fiscal year ended June 30. The report said CalPERS had 160 external managers as of June 30, down from 212 from the previous year.

The report does not list which managers were terminated.

“CalPERS advanced its investment mission to focus on reductions in cost, complexity, risk and on fewer (overall managers) but more strategic partnerships with investment external managers,” the report said.

Theodore Eliopoulos, chief investment officer, had made reducing the number of outside managers a priority for the $302.4 billion pension fund.

CalPERS spokeswoman Megan White said in an e-mail that the investment office is aiming for 100 external managers by 2020.

The report does not break out whether allocations for terminated managers were redistributed through in-house management or larger relationships with managers still on its roster.

Retirement system officials as part of plans to reduce fees have been increasing internal management as well as increasing the size of allocations to remaining external managers.