The $188.8 billion California State Teachers’ Retirement System, West Sacramento, on Tuesday reported a 1.4% net return for the fiscal year ended June 30, as volatile markets lowered returns.
The return topped that of the larger $299.4 billion California Public Employees’ Retirement System, Sacramento, which on Monday reported a 0.6% return for the fiscal year.
Nevertheless, the 1.4% return makes it the second year in a row that CalSTRS has not met its assumed annual rate of return of 7.5%. CalSTRS, however, is still ahead of the 7.5% rate for the three- and five-year periods ended June 30, with annualized returns of 7.8% and 7.7%, respectively.
For the 10- and 20-year periods ended June 30, the pension fund returned an annualized 5.6% and 7.1%, respectively.
CalSTRS Chief Investment Officer Christopher J. Ailman cautioned in a statement against looking at one year’s performance. “Single-year performance and short-term shocks, such as Brexit, may catch headlines, but the CalSTRS portfolio is designed for the long haul,” Mr. Ailman said. “We look at performance in terms of decades, not years. The decade of the 2010s has so far been a good performer, averaging 10.3% net.”
But that might not be the case in the future. Consultants have said that the most pension plans like CalSTRS can expect to make yearly over the next decade is around 6.5%.
CalSTRS’ global equity portfolio, its largest asset class, returned, -2.3%, 20 basis points above its custom benchmark.
Fixed income returned 5.7%, 10 basis points below its custom benchmark; private equity, 2.9%, 170 basis points below its custom benchmark; real estate returned 11.1%, 150 basis points below its custom benchmark; absolute return, 0.2%, 100 basis points below its custom benchmark; and the inflation-sensitive portfolio (long-dated Treasuries and TIPS) returned 4.2%, 30 basis points below its custom benchmark.
