The California Public Employees’ Retirement System is reporting a net loss of 6.1 per cent for its last fiscal year, according to its preliminary annual results.
During the year ending June 30, 2022, the public sector defined benefit pension plan’s value decreased from $466.84 billion to $440 billion. According to a press release, the losses were the result of tumultuous global markets, geopolitical instability, domestic interest rate hikes and inflation.
“We’ve done a lot of work in recent years to plan and prepare for difficult conditions,” said Marcie Frost, chief executive officer of the CalPERS, in the release. “Despite the market conditions and their impact on our returns, we’re focused on long-term performance and our members can be confident that their retirement is safe and secure.”
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On a percentile basis, the CalPERS’ greatest losses occurred in its fixed income portfolio, which dipped 14.5 per cent. On a total value basis, the greatest losses were in its public equities portfolio, which dropped 13.1 per cent and accounts for about 79 per cent of its total investments. However, its alternative portfolios ended the year in positive territory, with private equities generating 21.3 per cent returns and real assets growing by 24.1 per cent.
In the release, Nicole Musicco, chief investment officer of the CalPERS, said the investment organization’s traditional diversification strategies didn’t perform as effectively as expected due to the simultaneous declines in both equities and fixed income. “This is a unique moment in the financial markets and we’ve seen a deviation from some investing fundamentals. . . . But despite a challenging year, we were able to outperform our total fund benchmark by 90 basis points and provide strong returns from our private market asset classes. These are bright spots that we can build on as we implement our new strategic asset allocation and increase our exposure to private market assets.”
Overall, the year marked the CalPERS’ worst performance since 2009. With its discount rate of 6.8 per cent, the estimated overall funded status fell to 72 per cent.
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