SACRAMENTO, CA – The California Public Employees’ Retirement System (CalPERS) Monday reported a preliminary 0.61 percent net return on investments for the 12-month period that ended June 30, 2016. CalPERS assets at the end of the fiscal year stood at more than $295 billion and today stands at $302 billion.
CalPERS achieved the positive net return despite volatile financial markets and challenging global economic conditions. Key to the return was the diversification of the Fund’s portfolio, especially CalPERS’ fixed income and infrastructure investments.
Fixed Income earned a 9.29 percent return, nearly matching its benchmark. Infrastructure delivered an 8.98 percent return, outperforming its benchmark by 4.02 percentage points, or 402 basis points. A basis point is one one-hundredth of a percentage point.
The CalPERS Private Equity program also bested its benchmark by 253 basis points, earning 1.70 percent.
“Positive performance in a year of turbulent financial markets is an accomplishment that we are proud of,” said Ted Eliopoulos, CalPERS Chief Investment Officer. “Over half of our portfolio is in equities, so returns are largely driven by stock markets. But more than anything, the returns show the value of diversification and the importance of sticking to your long-term investment plan, despite outside circumstances.”
“This is a challenging time to invest, but we’ll continue to focus on our mission of managing the CalPERS investment portfolio in a cost-effective, transparent, and risk-aware manner in order to generate returns for our members and employers,” Eliopoulos continued.
For the second year in a row, international markets dampened CalPERS’ Global Equity returns. However, the program still managed to outperform its benchmark by 58 basis points, earning negative 3.38 percent. The Real Estate program generated a 7.06 percent return, underperforming its benchmark by 557 basis points. The primary drivers of relative underperformance were the non-core programs, including realized losses on the final disposition of legacy assets in the Opportunistic program.
“It’s important to remember that CalPERS is a long-term investor, and our focus is the success and sustainability of our system over multiple generations,” said Henry Jones, Chair of CalPERS Investment Committee. “We will continue to examine the portfolio and our asset allocation, and will use the next Asset Liability Management process, starting in early 2017, to ensure that we are best positioned for the future market climate.”
Today’s announcement includes asset class performance as follows:
| Net Rate of Return | Versus Indexes | |
|---|---|---|
| Public Equity | -3.38% | 58 bps |
| Private Equity | 1.70% | 253 bps |
| Fixed Income | 9.29% | (2) bps |
| Real Assets | 5.99% | (516) bps |
| Real Estate | 7.06% | (557) bps |
| Infrastructure | 8.98% | 402 bps |
| Forestland | -9.56% | (1,246) bps |
| Liquidity | 0.36% | 17 bps |
| Inflation Assets | -3.64% | 147 bps |
Returns for real estate, private equity and some components of the inflation assets reflect market values through March 31, 2016.
CalPERS 2015-16 Fiscal Year investment performance will be calculated based on audited figures and will be reflected in contribution levels for the State of California and school districts in Fiscal Year 2017-18, and for contracting cities, counties, and special districts in Fiscal Year 2018-19.
The ending value of the CalPERS fund is based on several factors and not investment performance alone. Contributions made to CalPERS from employers and employees, monthly payments made to retirees, and the performance of its investments, among other factors, all influence the ending total value of the Fund.
The Board has taken many steps to sustain the Fund as part of CalPERS’ Asset Liability Management Review Cycle (PDF) that takes a holistic and integrated view of our assets and liabilities.
Source:
https://www.calpers.ca.gov/page/newsroom/calpers-news/2016/preliminary-investment-returns
5 comments
The story is loaded with positive information and results, however you wouldn’t know that from the title. I expect the drive-by nay sayers and doomsday whack a doodles to chim in shortly. They never seem to understand the investment strategy known to many as long term. Shame.
Well Charlie, I do know they will be asking the cities to up their contribution to make up the difference just as they have done before. Not good news for the city of Antioch whose financial director publicly says we will be bankrupt in 2 years!
Well there you go Julio! You really want me to believe that YOU KNOW they will be asking the cities to make up the difference? That’s funny because I KNOW otherwise. Julio, look up LONG TERM. Bad years are averaged along with good years. CalPERS does not do knee jerk financial planning, but rather smooth the ups and downs buy focusing on a average rate of return. In case you haven’t had reason to notice, the market has had a HUGE upswing since the reporting period ended. The market indices are at a all time high.
Sorry this was not the doom and gloom you expected.
Stop trying to blame Antioch’s bad policies and politics for its own obligations and bad decisions. If it is going bankrupt it is not because of CalPERS. Antioch has one of the shittiest city councils known in California. Place the blame directly on the voters who elected people like Harper, Rocha, Wilson and company..You got what you voted for.
This means larger contributions for pensions by the public. Our fire service will be taking away services to pay for under funding and over expecting returns. Soon your fire departments will be staffed by a chief and a financial planner because the rest will go to retired spikers. Pray for our children’s future be cause we have already spent it.
Thanks Unome for your usual .02. I always take everything you say in your comments, spin it 180 degrees and then it makes perfect sense. You never fail to disappoint.
You appear to live in some upside down world. Must be awkward for you.
Based on your commentary, you are the one consistently “praying”. Trouble is…. all you do is pray for doom.
Our children will be just fine. It’s you the rest of us are worried about, and for good reason. You need help dude. But you think you know better, that much I am sure of. Your profile display’ all the symptoms of a true narcissist. You don’t get it and never will. The CCTPA has a place for you. You will fit right in!
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