Real Estate, Fixed Income Help California, Virginia Funds

August 17, 2001 ( nation's largest public pension system suffered a 7.2% loss last year, with bonds and real estate gains offsetting the impact of a slumping stock market -- sectors which also boosted Virginia's state retirement plan.

The $156 billion California Public Employees’ Retirement System (CalPERS) noted that its real estate investments gained 14.4% for the year ended June 30, 2001, while domestic fixed income assets rose 12.6%.

Loss Leaders

The System’s private equity investments posted an 11.0% loss, below its hurdle rate but well in line with the private equity market, according to CalPERS.

CalPERS’ international bond portfolio posted a 7.3% loss, while the international stock holdings fell 20.1%. CalPERS US stocks declined by 13.9%.

The System has earned a 5% annualized return for the 3-year period ended June 30, 2001, and 10.7% annualized return for the 5-year period.

Public equities represent approximately 59% of CalPERS assets. Fixed income represents 28% of the system’s assets; real estate, 8%; and private equity represents 5% of assets.

Real Returns For Virginia

For the first time since 1984, the Virginia Retirement System (VRS) reported a negative fiscal year return-on-investment, -7.4%. Real estate and fixed income also helped offset equity losses for the fund, which fell by $3 billion to $37.6 billion.

Real estate returned 14.1% for the nation’s 29 th largest pension fund, while fixed income gained 11.7%. Those gains helped offset the losses of 12.2% and 25.2% in US and non-US equities, respectively.

The fund’s private equity portfolio lost 15.2% during the period.

At the fiscal year-end, the portfolio had:

  • $18.1 billion invested in US equities
  • $5.5 billion in non-US equities
  • $9.2 billion in fixed income
  • $1.7 billion in real estate
  • $2.5 billion in private equity

VRS provides benefits to 102,000 retirees and covers 304,000 active members.

– Nevin Adams