The California Public Employees’ Retirement System announced on Feb. 13 that it had a lower return of about $900 million since September, when the fund reduced risk from the portfolio by selling some equities.
CalPERS Chief Investment Officer Ted Eliopoulos said during a board meeting that he wanted to “allay some of the anxiety and fears” by reminding the board that “our practice require us to take much longer periods of time into account.”
CalPERS decided in September to reduce some volatile stocks and private equity from its portfolio. Over the four months following until Dec. 31, the fund made more than $12 billion in net equity sales, according to fund documents. During that time, it experienced a lower return of approximately $900 million.
The nation’s largest public pension fund hopes to avoid another calamity like the one it experienced during the 2008 recession, when its funding status dropped to 61 percent from 100 percent. Today, the funding status is 63 percent.
CalPERS Board Member Theresa Taylor said, “I know we are risk adverse.” But she urged the fund to also consider its options “to not be leaving money on the table.”
CalPERS expects a 5.8 percent annual investment return under its new portfolio asset allocation, significantly lower than the fund’s assumed rate of return of 7 percent by 2020.
The fund plans to make up for lower returns expected in the coming decade over the next 30 years or more.