Public and private equity investments drove
better-than-expected returns for the nations largest
public pension fund during its most recent fiscal year.
On Friday the California Public Employees Retirement
System (CalPERS) released its preliminary investment results for the fiscal year that ended
June 30, 2017. The pension fund earned 11.2 percent over that
time period, with its public equity portfolio notching a net
return of 19.7 percent and its private equity portfolio
returning 13.9 percent. The pensions assets stood at more
than $323 billion at the end of the fiscal year.
This news comes as investors are pouring capital into private equity to take
advantage of its steady returns. Meanwhile, the public equities
market continues to outperform, with the Standard &
Poors 500 up 13.3 percent year-on-year as of midday
CalPERS announced in April that it was reviewing how it
invests in private equity managers in hopes of avoiding the
asset classs typically high investment fees. Though
private equity produced better returns than it has in previous
years at CalPERS, the allocation underperformed policy
benchmarks by 640 basis points, or 6.4 percent, according to CalPERS.
Still, this is the best preliminary net return for CalPERS
in the past three years. In fiscal year 2015-2016, the pension
funds preliminary net returns were 0.61 percent, and in
fiscal year 2014-2015, preliminary net returns were 2.4
I am proud of our investment team for achieving double
digit returns this year, said Ted Eliopoulos,
CalPERSs chief investment officer, in a statement.
Our globally diversified portfolio performed well across
most asset classes, and we were able to take advantage of what
the market gave us.
In 2015, fixed income drove the pensions results, with
a 9.29 percent net preliminary return, rather than private
equity. Private equity returns hovered at 1.7 percent that
year. Fixed income earned just 0.3 percent for the most recent
CalPERS remains underfunded. According to the pension, it is
68 percent funded, an increase of 3 percentage points since
fiscal year 2015.
Of course, we welcome this fiscal years strong
returns, but we also remain about 68 percent funded and
vulnerable to a downturn in stock markets, said Marcie
Frost, CalPERSs CEO, in a statement. This will be
our focus as we continue to move through the asset allocation
process over the next six months.
CalPERS outperformed peers like the University of
Californias pension plan, which reported a return of 6.8 percent for the fiscal year ending
March 31, 2017. The fund manages $107.2 billion in assets.