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CalPERS, CalSTRS post solid investment returns

January 20, 2011 | 10:42 am

Investment returns at the nation's two largest public pension systems are back on track after suffering steep losses during the Great Recession of 2008-09.

The California Public Employees' Retirement System on Thursday reported that its investments grew by 12.5% in the calendar year that ended on Dec. 31. That's in line with a 12.1% gain posted for calendar year 2010.

The smaller California State Teachers' Retirement System ended the year with a 12.7% return.

Both funds' total performance bested their selected market benchmarks.

"We repositioned our portfolio to take full advantage of the overall gains in the market last year," said CalPERS Chief Investment Officer Joseph Dear. "The strong returns we saw in 2010 prove that our top-to-bottom evaluation of all our investments is paying off for our beneficiaries and our employers."

As of Jan. 18, CalPERS' total investment portfolio was valued at $228.5 billion. That's still 12% off its historic high of $260 billion in October 2007 but considerably better than the recession low of $160 billion in March 2009.

Last year, CalPERS' investment performance topped market benchmarks in all areas except real estate. Global stocks returned 14.6%, fixed income and bonds 11.6% and so-called alternative investments, such as venture capital, private equity, returned 21.5%.

Only CalPERS' real estate investments lost money last year, falling by 5.1%, compared with a market benchmark that grew by 9.3%.

CalPERS' performance for both its alternative investments and real estate reflected returns through the third quarter of last year because of a lag in reporting all financial data.

Growth in CalSTRS investments has pushed the fund back to its October 2008 level at $146.4 billion.

"This is very encouraging news, but the historic market declines of the 2008-09 financial crisis showed us that CalSTRS cannot solely invest its way to healthy long-term funding," said Chief Executive Officer Jack Ehnes.

Ehnes and his board of directors plan to ask the Legislature this year for a boost in employer contributions to the retirement fund. CalSTRS still faces a shortfall in the money it needs to meet its long-term financial obligations, Ehnes said.

For its part, CalPERS already has begun boosting contributions paid by its member employers, including state and local governments and school districts.

-- Marc Lifsher