US - CalPERS, the California Public Employees Retirement System, has lost $16bn since August last year, a 7.2% loss for the 2001 financial year.
Last year CalPERS, the largest US public pension fund, posted a positive 10.5% return. This year the fund had a -7.25% return, which it attributed to a ‘lacklustre’ stockmarket. As a result of the loss, CalPERS total assets now stand at $156bn.
During the year, CalPERS international stocks fell 20.1% whilst US stocks declined by 13.9%. The fund’s international bonds posted a 7.3% loss, but fared better than its industry benchmark, the Solomon Brothers Non-$ World Government Index, which suffered a 7.5% decline. Private equity investments posted an 11.0%.
Daniel Szente, the fund’s chief investment officer, said: “Clearly, this result interjects a sense of reality into what has been a fairytale environment in the equity market.
“Equity market returns in particular have been abnormally high and a return to more normal conditions should be expected. We have always known we would have to give back some of the spectacular stock market returns of recent years.”
Despite this year’s poor equities results, CalPERS’ US fixed income and real estate returns were positive. Real estate earned a 14.4% return, while US bonds had a 12.6% return, outperforming the 11.8% earned by the Solomon Brothers Large Pension Fund Index.
CalPERS stressed that despite the figures its ability to pay benefits would not be affected, and that it would not make any immediate changes to its overall asset allocation or investment strategy.
Currently, the fund’s allocation is equities (59%); fixed income (28%); real estate (8%); and private equity (5%).
By Geoffrey Ho
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