Public Equities Drive CalPERS’ 3.2% Q1 Return

The pension giant’s portfolio rose to $452.6 billion, but missed its benchmark by more than 100 basis points.

 




The California Public Employees’ Retirement System’s retirement fund returned 3.2% during the first quarter of 2023, raising its total asset value to $452.6 billion, according to the pension giant’s latest investment performance report. However, the performance fell short of its benchmark’s quarterly return of 4.3%.

Gains during the quarter were led by the portfolio’s public equity investments, which returned 5.9% for the period ending March 31. The pension fund’s global fixed income investments gained 3.7%, matching its benchmark’s performance, followed by private debt, which returned 1.3% but missed its benchmark by 281 basis points.

“All public markets segments generated positive returns as markets shifted to expecting interest rate cuts by the Federal Open Market Committee as the economy slows,” the pension fund wrote in the report.

Private equity investments returned 1.2%, well below its benchmark’s return of 10.2%, while the real assets portfolio lost 4.0% during the quarter, beating its benchmark’s loss of 5.1% during the quarter.

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“Private markets continue to offer mixed results,” said the report. “Economic uncertainty contributed to a steep decline in real estate transaction volumes. Infrastructure transactions are likely to slow as well.” It added that CalPERS’ staff are monitoring “rising cap rates and increased interest rates as they drive downward pressure on valuations.”

The pension fund reported annualized 10- and 20-year gains of 6.9% and 7.5% respectively, while its benchmark returned 6.8% and 7.9% respectively over the same time periods. And over the shorter term, the portfolio had three- and five-year returns of 8.7% and 5.7% respectively, edging out the benchmark’s three-and five-year returns of 8.1% and 5.5% respectively. During the trailing 12 months ending March 31, the pension fund’s investments lost 5.0%, but outperformed the benchmark’s loss of 5.9%.

CalPERS’ real assets were the only investments in its portfolio that didn’t post negative returns for the trailing year, returning 3.9% during the time period. However, all asset classes except real assets have generated positive excess performance for the trailing five- and 10-year periods, according to the report.

The report also said that total plan volatility has been relatively stable over the last 12 months and is in line with the transition to the strategic asset allocation CalPERS adopted in 2021.

 

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