CalSTRS, CalPERS both miss net return goal for fiscal 2019

  • CalSTRS reported a 6.8 pct net return for FY 2018-2019
  • CalPERS reported a 6.7 pct net return for FY 2018-2019
  • Both pensions’ private equity returns are down from FY 2017-2018

California State Teachers’ Retirement System (CalSTRS) announced Tuesday it returned a net 6.8 percent on investments for the fiscal year ending June 30, slightly below its goal of 7 percent. It also reported its highest-ever fund value at $236.9 billion.

The pension fund’s three-year, 10-year and 25-year returns were above 7 percent, with the five-year return at 6.9 percent and the 20-year return at 6.2 percent.

CalSTRS reported its private equity return at 10.5 percent, the highest of all its asset classes and strategies, which includes public equity and real estate, among others. That is down from 13.8 percent for the previous fiscal year.

“It was a roller coaster year and a very challenging environment in which to generate returns,” said Chief Investment Officer Christopher Ailman in a statement.

“One year is but a mile in a marathon to a long-term investor,” Ailman added in an email to Buyouts. “More importantly over 10 years we earned 10.1 percent net of fees. Over the past 30 years we’ve earned 8.1 percent net, which is in excess of the current long-term investment return assumption of 7 percent.”

CalSTRS’s report comes just days after the California Public Employees’ Retirement System (CalPERS) announced that it had also not met its expected investment return target of 7 percent. For the 12-month period ending on June 30, CalPERS reported a 6.7 percent overall return.

As Private Equity International reported last week, CalPERS’ private equity return decreased by more than half, to 7.7 percent in fiscal 2019 from 16.1 percent the year before. It reported its total fund value at more than $370 billion.

“While we did not achieve our 7 percent actuarial return target this fiscal year, I can’t stress strongly enough that we are long-term investors,” CalPERS chief investment office Yu (Ben) Meng said in a statement released last week. “We make decisions based on an investment horizon that stretches across years and even decades.”