The state of California has no shortage of financial woes, but returns for its two biggest public pension systems are back to levels not seen since the 2008 economic implosion.
Indeed, in quick succession, the $146.4 billion California State Teachers’ Retirement System and the $225.7 billion California Public Employees’ Retirement System reported meaningful gains in the calendar year ending Dec. 31, with CalSTRS notching a 12.7 percent return and CalPERS seeing a 12.5 percent return on its investment portfolio.
For CalPERS, the performance means its assets have grown by more than $65 billion since March 2009, when the pension hit its low point of $160 billion. CalSTRS has meanwhile gained more than $34.8 billion over the same period.
Both pensions touted beating their benchmarks in their releases. CalSTRS topped its benchmark by 0.24 percent, led by its U.S. stock portfolio, which returned 17.2 percent last year. Its private equity portfolio performed none too shabbily, either, returning 16.9 percent to the fund. And CalSTRS’s non-U.S. equity holdings returned 12.8 percent. Performing the worst were CalSTRS’ real estate holdings, which eked out a return of just 0.01 percent.
By comparison, CalPERS’ performance was given an even bigger boost by its private equity program, which returned 21.5 percent to the pension, followed by its U.S. equity portfolio, which returned 17.3 percent and its non-U.S. equity holdings, which gained 12.8 percent.
As a point of comparison, the S&P 500 closed 2010 up 15 percent.
Christopher Allman, CalSTRS’s chief investment officer, managed to sound both proud yet contrite in the pension’s press release. “While we’ve set the groundwork for a slow but steady recovery, we still have to work through the losses we took in 2008. Nonetheless, we’re beginning to see the first green shoots of a rebound from the financial crisis,” he said.
Joseph Dear, CalPERS’s chief investment officer, sounded a little more self-assured in his fund’s statement. “We repositioned our portfolio to take full advantage of the overall gains in the market last year. The strong returns we saw in 2010 prove that our comprehensive evaluation of all our investments is paying off for our members, employers and taxpayers.”
Added Dear in the release: “During 2010, we reduced portfolio leverage and ended relationships with several real estate partners who didn’t meet our expectations. Our current focus is on income-generating properties, and now that we’re beginning to see signs of a rebound in the market we’ll be ready to take advantage of opportunities as they arise.”