The California Public Employees Retirement System (CalPERS) reported a preliminary 11.2% return for the 2016-2017 fiscal year, bringing assets to $323 billion.
CalPERS’s Public Equity program delivered the strongest returns, generating a 19.7% preliminary net gain. Private Equity’s preliminary net returns were 13.9%, followed by Real Estate with a 7.6% preliminary net return.
Based on the preliminary fiscal year returns, CalPERS’s overall funded status is estimated to have risen 3% from the previous fiscal year to 68%. This estimate is based on a 7% discount rate.
Fixed Income returned 0.3% and Inflation Assets dropped 2.7%, bringing the total fund performance to 8.8% over the past five years, 4.4% over the past 10 years, and 6.6% for the 20-year period.
The pension is in the middle of its asset liability management process, which it conducts every four years,” Ted Eliopoulos, CalPERS CIO, told CIO. The fund will carefully weigh risks as it seeks returns to further increase its funded status moving forward. “We will be conducting quite elaborate choreography, looking at asset allocation, our liabilities and the risk tolerance of our board in conjunction with our expected rates of return with our other expected rates of returns for our various candidate portfolios,” Eliopoulos said.
As for the current portfolio’s long-term total funding status, Eliopoulos expects a 6% return over the next 10 years, according to the fund’s December 2016 review.
“Of course, we welcome this fiscal year’s strong returns, but we also remain about 68% funded and vulnerable to a downturn in stock markets, ” Marcie Frost, CalPERS CEO, said in a statement. “This will be our focus as we continue to move through the asset allocation process over the next six months.”
CalPERS’s final 2016-2017 fiscal year investment performance will be calculated based on audited figures. However, the final value of the fund is not only based on investment performance, but also influenced by employer and employee contributions, monthly retirement payments, and other factors.
The full chart for asset class performance can be viewed below.