CalPERS, CalSTRS PE Portfolios Up Nearly 14 Percent Each

  • CalPERS private equity portfolio rises 13.6 percent in 2012-2103
  • CalPERS total portfolio rises 12.5 percent To $257.8 billion
  • CalSTRS private equity investments gain 13.9 percent

CalPERS’s private equity holdings rose 13.6 percent, lagging the pension’s 16 percent target, as venture capital holdings weighed on the results for the 2012-2013 fiscal year, according to a conference call with Chief Investment Officer Joseph Dear and Real Desrochers, private equity, senior investment officer, as well as other pension fund executives.

However, the three-year return of 14.5 percent for private equity came in ahead of the 13.7 percent benchmark, officials said.

The pension continues to pare down and sell parts of its private equity and venture capital portfolio, but it did not provide details of these efforts.

Public equity generated a 19 percent return; fixed income fell 1.6 percent, real estate investments rose 11.2 percent and absolute return strategies such as hedge funds rose 7.4 percent.

CalPERS, the largest public pension fund in the United States, reported an overall 12.5 percent return on investments for the 12 months ended June 30, and outperfomed its target by 1.5 percent. CalPERS’s assets at the end of the fiscal year totaled more than $257.8 billion.

In fiscal 2011-2012, CalPERS generated a total return of 1 percent, falling short of its 1.7 percent benchmark.

The 12.5 percent return for 2012-2013 exceeds the fund’s discount rate of 7.5 percent, the long-term return required to meet current and future obligations. Henry Jones, chair of CalPERS’s investment committee, said the pension fund is pleased by the performance.

CalSTRS, the second largest public pension fund in the United States, said its private equity portfolio rose 13.9 percent, below its target of 18 percent. Global equity increased by 19.2 percent, while real estate jumped 14.1 percent. The total fund rose 13.8 percent, a 0.5 percent outperformance over its target. The total value of its portfolio stood at $165.8 billion as of June 30.

The retirement fund said it continues to face a long-term funding gap of $70 billion after suffering a “severe setback” in the crash of 2008.

CalSTRS Chief Executive Officer Jack Ehnes called on the state legislature and Gov. Jerry Brown to carry out a long-term funding plan that includes a “gradual, predictable and fair” increase in contributions. The CalSTRS board has been calling for a review of contributions since 2006 because, unlike other funds, it lacks the authority to adjust them on its own.

CalSTRS Chief Investment Officer Christopher Ailman said the pension fund could face a downgrade from Standard & Poor’s if nothing is done. “Despite solid investment returns in three of the last four years, Standard & Poor’s recently cited the lack of a long-term funding plan as the reason to hold back on a ratings upgrade,” Ailman said in a prepared statement.

Last year, CalSTRS reported a total return of 1.8 percent and in 2010-11 it generated a return of 23.1 percent.