The two largest public pension funds in the United States had double-digit returns on their investments over the past year.
The California Public Employees’ Retirement System(CalPERS)earned an estimated 19.1% return on investments for the 12 months that ended on June 30, 2007—the biggest gain in nearly a decade.
The percentage gain more than doubled the overall CalPERS assumed rate of return of 7.75%, which is required to fund retiree benefits.
“Almost all of our asset classes returned over 20% and we beat our benchmarks on all our major asset classes,” says the chief investment officer, Russell Read. “Our strategic asset allocation made us well positioned to take advantage of strong capital markets performance, domestically and international.”
Total assets increased by US$36.5 billion to $247.7 billion and have increased by $128 billion over the past decade.
Separately, the California State Teachers’ Retirement System(CalSTRS)posted a 21% return on investments, adding $26 billion to fund fund with $170.4 billion in assets as of June 30, 2007.
All five asset categories exceeded their respective benchmarks with the entire portfolio’s return beating its benchmark of 17.5%.
The strong returns are attributed partly to decisions to keep the amount invested in international stocks and real estate above their target asset allocation ranges while funds invested in fixed income were kept at the bottom of the target range.
“By any measure, this will go down as one of our most spectacular years,” explains Christopher J. Ailman, the fund’s chief investment officer. “We played it smart when the opportunities arose and it demonstrates a consistent flow of great investment decisions over the last five years.”
CalSTRS has doubled its portfolio in four and a half years following the U.S. stock market’s steep decline in October 2002.
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