CalSTRS earned a 6.3% net return for fiscal year 2023, which is expected to be equal to its benchmark, said Christopher Ailman, chief investment officer for the $315.6 billion pension plan, in an interview.
The California State Teachers' Retirement System, West Sacramento, earned an annualized net return of 10.1% for the three years, 8.2% for the five years, 8.7% for the 10 years, 8% for the 20 years and 7.8% for the 30 years ended June 30. Each of the longer-term periods exceeded CalSTRS' 7% assumed rate of return.
A year ago, the Federal Reserve started raising rates and most economists were predicting a recession, Mr. Ailman said.
"We thought fiscal year 2022-2023 would be a challenging year," he said.
It turned out that it was a bullish 12-month period, with stocks up 19%, Mr. Ailman said.
This year the differences in pension funds returns will be driven by their public stock allocation, he said.
"We should have been really aggressive, go figure," Mr. Ailman said.
But, when every quarter economists are predicting a recession two quarters out, it's hard to be aggressive, he said.
CalSTRS' actual asset mix as of June 30 was 40.3% public equity, 16.1% real estate, 15.5% private equity, 10.1% fixed income, 8.8% risk mitigating strategies, 6.1% inflation sensitive, 1.4% innovative strategies, 1.5% liquidity and 0.1% strategic overlay.
Separately, the board on Wednesday revised its asset allocation one step closer to the new long-term strategic allocation it adopted in May. The board increased private equity target to 14% from 13% and decreased public equity by 1 percentage point to 41%. In May, the board adopted a long-term target allocation that reduced public equity by 4 percentage points to 38% and increased fixed income by 2 percentage points to 14%. The long-term asset allocation also increased private equity and inflation-sensitive allocations by 1 percentage point each to 14% and 7%, respectively and kept the rest of the asset class targets the same: real estate at 15%, risk mitigating strategies at 10% and cash at 2%.