According to a CalPERS press release, the retirement fund went beyond industry benchmarks in five of the eight major investment portfolios during the fiscal year, generating about $8 billion more in investment returns than it would have generated from the 7.75% it needed to meet future pension benefits.
“Our annual performance figures represent dollars saved for public employers and employees since investment returns pay $3 of every $4 of our members’ pensions,” said Charles Valdes, chair of CalPERS’ investment committee, in the release. “Our diversified portfolio helped us weather what has been a volatile domestic public equity market in recent months, with strong performance again in real estate, international stocks and private equity.”
At the end of the fiscal year, 68% of the CalPERS portfolio was invested in public and private equity, 22% in bonds and other fixed income, and 5% was invested in real estate.
Out of all of the asset classes, the fund’s real estate portfolio was the top performer, generating a 38.4% return on its investments in office, retail, apartment and industrial assets, and it generated a 36.5% return for housing, land and California urban real estate investments. The performance of the real estate portfolio was followed by international stocks, which returned 27.2%, just shy of the 27.7% benchmark.
Domestic stocks barely beat the benchmark of 9.5%, with a 9.6% return. CalPERS alternative investments drew in 19.2% returns, beating out an 18.6% benchmark, and absolute return strategies garnered an 11.6% return, trumping the hedge fund’s 8% benchmark. The system’s corporate governance funds, which invest in under-performing public companies, posted a 17% return, compared to a benchmark of 20.3%.
According to a June article by the Sacramento Bee, the pension fund needed an additional $240 million from taxpayers this year to meet its pension obligations (See CalPERS Needs $240M to Meet Year’s Obligations ).