CalPERS Sees First Negative Net Return Since 2009

Private equity and real assets helped offset some of the pension’s losses on stocks and bonds during the 2021-2022 fiscal year.

Sacramento, Calif. (David Paul Morris/Bloomberg)

Sacramento, Calif.

(David Paul Morris/Bloomberg)

The California Public Employees’ Retirement System reported its first negative annual net return since the global financial crisis in 2008 and 2009.

On Wednesday, the largest public pension plan in the U.S., with $440 billion in assets under management, announced a preliminary net loss on investments of 6.1 percent for the 12-month period ending June 30, 2022.

CalPERS attributed the loss to the “tumultuous” and “volatile” global markets, along with geopolitical instability, interest rate hikes in the U.S., and inflation. “This is a unique moment in the financial markets, and we’ve seen a deviation from some investing fundamentals,” CalPERS Chief Investment Officer Nicole Musicco said in a statement. “For instance, our traditional diversification strategies were less effective than expected, as we saw both public equity and fixed income assets fall in tandem.”

Specifically, CalPERS’ public equity investments — which comprise about 79 percent of its total portfolio — saw a 13.1 percent loss. Fixed income also ended the period with a 14.5 percent loss.

In 2021, CalPERS committed more capital to the private markets than any other public pension fund in the U.S. This fiscal year, those commitments have helped balance the losses. The fund’s private investments had much stronger returns in the 2021-2022 fiscal year than its public counterparts did, with private equity investments delivering a net rate of return of 21.3 percent. Real assets also finished the year strong with a 24.1 percent return, but just missed the policy benchmark of 27.1 percent.

Musicco noted that despite the challenging year for public equities and fixed income, CalPERS outperformed its total fund benchmark by 90 basis points. “These are bright spots that we can build on as we implement our new strategic asset allocation and increase our exposure to private market assets,” she said.