The return brought in $29 billion for the fiscal year ending on June 30, 2011. CalSTRS investment portfolio’s market value ending June 30 was $154.3 billion.
A press release said this marks the second consecutive year of robust performance, after the fiscal year 2009-10 return of 12.2%. However, losses of 25% in fiscal year 2008-09 as a result of the world economic downturn remain a lingering drag because the actuarial impact of CalSTRS investment portfolio performance is based on a three-year rolling average. That puts the three-year return, at 0.98%, well below the actuarial 7.75% rate.
According to the announcement, when the next actuarial valuation is presented in spring 2012, the CalSTRS funding level will therefore drop below today’s 71%, but the most recent 23.1% return will help slow the decline.
By asset class, CalSTRS’ returns were:
- Global Equity – 31.9%;
- Private Equity – 22.5%;
- Real Estate – 17.5%;
- Inflation Sensitive – 13.6%; and
- Fixed Income – 5.4%.
As of June 30, 2011, the portfolio holdings were 53.4% in U.S. and non-U.S. stocks, 17.8% in fixed income, 14.3% in private equity, 12% in real estate, 1.8% in absolute return assets, and 0.7% in cash.
“[W]e have taken steps to generate returns in response to the financial crisis, such as our temporary shifting of 5 percent of assets from global equities to take advantage of opportunities in distressed markets in fixed income, real estate and private equity. This move alone has yielded returns of about 29 percent since inception, ahead of the equity market over the respective term,” said CalSTRS Chief Investment Officer Christopher J. Ailman, in the announcement.
The other steps the Teachers’ Retirement Board and investment staff took to position the fund for ongoing recovery in the wake of the 2008-09 financial crisis include:
- Expanding target asset ranges to avoid having to sell at a loss;
- Permanently shifting 5% of the portfolio from global equities to create a new asset class that protects against inflation;
- Adopting a new asset allocation mix to further diversify the portfolio and reduce its stake in the global stock market; and
- Launching the Innovations and Risk unit to explore new investment strategies such as macro global hedge funds, commodities and microfinance.