The California State Teachers’ Retirement System (CalSTRS) saw a 9% net return in the fiscal year ending June 30, exceeding its assumed expected return of 7% by two percentage points, Chris Ailman, the system’s CIO, told the CalSTRS investment committee Friday.
The 9% return also beat the system’s custom benchmark of 8.6%.
The overall returns for the $223 billion retirement system, the second-largest in the US by assets under management, beat the nation’s largest retirement system, CalPERS, which announced last week fiscal year returns of 8.6% for the June 30 fiscal year.
“We will rank high compared to similar funds, but it is only one year,” Ailman said. “We need to repeat that performance year in and out, on average, over the next 30 years.”
Private equity was the best-producing asset class with returns of 13.8%, slightly under its custom benchmark of 14.7%.
This was followed by global public equities, which produced returns of 11.7% against a custom benchmark of 11.8%.
The third-best results among large assets classes was real estate, which saw results of 10.4%, above the custom benchmark of 7.1%
Fixed income saw returns of 0.3%, above the returns of the custom benchmark of -0.2%.
CalSTRS’s new risk mitigation asset class saw returns of 1.8%, beating its custom benchmark of 1.7%. The pension system has put $20 billion into the new asset class designed to mitigate the risk of a market downturn.
Among smaller strategies, Innovative Strategies had the biggest results of 11.4% above the custom benchmark of 6.5%.
CalPERS’s Inflation Sensitive Strategy saw results of 8.5%, above the custom benchmark of 4.5%.
Over the three-year period ending June 30, CalSTRS saw returns of 7.8%, over the five-year returns of 9.1% and 10-year returns of 6.3%.
Ailman said the 10-year results were more challenged. Those results include the great financial crisis when CalSTRS lost around 25% of its portfolio.
Tags: CalSTRS, Chris Ailman, Fiscal 2017, Pension, Private Equity, Returns