CalPERS on Monday announced a preliminary net return of 0.61% for the fiscal year ended June 30.
The latest fiscal-year return, coming on top of 2.4% in the prior year, means CalPERS has not met its expected 7.5% rate of return for the last 20 years, Ted Eliopoulos, chief investment officer, disclosed Monday at a press briefing on the returns.
The results also come as CalPERS' general investment consultant, Wilshire Associates, has estimated that a 7.5% return won't be achievable over the next decade. The consulting firm has estimated a 6.4% yearly return during the next 10 years.
Mr. Eliopoulos said CalPERS does not plan to move its periodic review of its rate of return, which is next scheduled to be determined at an investment committee meeting in February 2017.
Fixed income led all asset classes for the $299.4 billion California Public Employees' Retirement System, Sacramento, which finished the fiscal year with $295 billion in assets. Fixed income's 9.29% return fell two basis points below its benchmark.
CalPERS' overall real assets program returned 5.99%, 516 basis points below its benchmark, but within real assets, infrastructure's 8.98% return exceeded its benchmark by 402 basis points. Real estate returned 7.06%, 557 basis points below its benchmark, and forestland returned -9.56%, 1,246 basis points below its benchmark.
“Positive performance in a year of turbulent financial markets is an accomplishment that we are proud of,” said Mr. Eliopoulos in a news release. “Over half of our portfolio is in equities, so returns are largely driven by stock markets. But more than anything, the returns show the value of diversification and the importance of sticking to your long-term investment plan, despite outside circumstances.”
Private equity returned 1.7%, 253 basis points above its benchmark; liquidity assets returned 0.36%, 17 basis points above its benchmark; public equities returned -3.38%, 58 basis points above its benchmark; and inflation assets returned -3.64%, 147 basis points above its benchmark.
The actual asset allocation as of June 30 was 51.9% public equities, 20.3% fixed income, 9.3% real estate, 8.9% private equity, 6% inflation assets, 1.5% liquidity, 0.9% infrastructure, 0.7% forestland and 0.5% other (including absolute return, multiasset class, overlay and transition assets).
Interim strategic targets are 51% public equities; 20% fixed income; 10% each private equity and real estate; 6% inflation; and 1% each forestland, infrastructure and liquidity.
