CalPERS on Monday announced it returned 1% on its investments for the 12 months ended June 30, below its own custom benchmark of 1.7%.
The results contrast sharply with the 20.7% return the $229.8 billion California Public Employees' Retirement System, Sacramento, earned in the year ended June 30, 2011.
CalPERS reported declines for the latest 12 months in public equity, -7.2%; forestland, -11%; and absolute return, -2%.
The best-performing asset class was real estate, at 15.9% for the year ended March 31. Real estate lags the rest of the portfolio by three months.
Fixed income was up 12.7%, followed by infrastructure, 8.4%; private equity, 5.4%; and liquidity, 4.6%.
Private equity performance was also as of March 31.
According to the pension fund's website, CalPERS' asset allocation as of March 31 was 51% public equity, 17% fixed income, 14% private equity, 8% real estate, 3% each inflation assets and liquidity, 2% absolute return and 1% each forestland and infrastructure.
“The last 12 months have been a very challenging period for investors,” Joseph Dear, CalPERS chief investment officer, told the retirement system's investment committee at an off-site meeting in Petaluma, Calif., on Monday.
CalPERS has an assumed annualized rate of return of 7.5%, and the low actual return could result an increase in the contribution rates for the state, other government entities and employees. Mr. Dear said in a news briefing on the results that 7.5% was still achievable over the long term, citing annualized returns of 7.73% over three years and 7.63% over 20 years, all for periods ended June 30.
But Mr. Dear said reaching that performance level will require the retirement system to develop new strategies.
(For five years, CalPERS earned an annualized 6.14%, and for 15 years, 5.88%, according to statistics provided by the pension fund.)
Separately, Mr. Dear said CalPERS completed a sale of around $1 billion in secondary private equity assets, which reduced the retirement system's private equity partners by 23. He said CalPERS had around 350 partners before the sale. He did not specify what holdings were sold.
