US - The California State Teachers' Retirement System (CalSTRS) and the California Public Employees' Retirement System (CalPERS) have posted bumper investment returns for the 2006-07 fiscal year.
CalPERS earned an estimated 19.1% return on investments for the 12 months that ended 30 June 2007 - the highest gain in nearly a decade, and brought its size to US$247.7bn.
The percentage gain more than doubled the overall 7.75% assumed rate of return which CalPERS is required to fund retiree benefits. Total assets increased by US$36.5bn over the year.
Russell Read, chief investment officer at CalPERS, said the fund’s strategic asset allocation made it well positioned to take advantage of strong capital markets performance, both domestically and internationally.
In terms of the different asset classes, real estate returned 20.2% to top the benchmark of 12.5%.
Total fixed income delivered 6.7%, beating the benchmark by 0.7%.
CalPERS added that absolute return strategies produced a 16.9% return to exceed the hedge fund benchmark of 10.4%.
In the case of CalSTRS, it posted a 21% return on investments, adding $26bn to the fund with $170.4bn in assets under management as of 30 June 2007.
CalSTRS said its fourth straight year of double-digit returns, including 13.2% last year, gave it a three-year average rate of return of 15.1%, a five-year average return of 13.1% and a ten-year average return of 9%.
Christopher Ailman, chief investment officer at CalSTRS, said it had been a spectacular year and the organisation had “played it smart”, when the opportunities arose.
In terms of performance, CalSTRS said its real estate portfolio posted a 32.9% return, outperforming its benchmark which delivered a 16.6% return.
International stocks produced a 30.2% return for CalSTRS, narrowly exceeding the MSCI All Country Free (excluding US) of 30%.
Meanwhile, assets in alternative investments posted a return of 27.6%, beating its custom benchmark of 6.6%.
Kim Shepherd, managing director for corporate communications at Wilshire Associates Incorporated, said with regard to the performance of CalPERS and CalSTERS, according to the Wilshire Trust Universe Comparison Service (Wilshire TUCS), the median one-year return for public and private pension funds as of 30 June 2007, was 16.5%.
She added that public funds larger than $1 billion had a median gain of 18%.
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