Infrastructure Investments Drive CalPERS’ Returns

The retirement system returned 8.6 percent for the fiscal year ending June 30, 2018.

Illustration by II

Illustration by II

The California Public Employees’ Retirement System (CalPERS) benefitted from its investments in private equity and infrastructure over the past year, according to its release of preliminary returns.

On Thursday, the retirement system announced the results for the fiscal year ending June 30, 2018.

The $351 billion fund returned 8.6 percent over that time period, with infrastructure investments pushing that number higher, posting a 20.6 percent net rate of return for the year.

CalPERS’ outgoing chief investment officer Ted Eliopoulos said the returns come at a volatile time in the market. While its private equities, public equities, real estate, and infrastructure outperformed benchmarks, he noted that the retirement system is still working on improving its funded status over the years to come.

“While we’ve seen some expected volatility in the markets, our diversified global portfolio has allowed us to exceed our expected rate of return of seven percent,” he said in a video. “While we’re pleased with the returns, we’re always focused on the long-term bigger picture.”

Eliopoulos announced his plans to resign from the pension fund in May. He will leave by the end of the calendar year, making way for a new chief investment officer to join the fund.

[II Deep Dive: Eliopoulos Out at CalPERS]

For the fiscal year, public equities returned 11.5 percent, private equity 16.1 percent, and real estate 6.8%. The infrastructure investments performed notably well, adding 1416 basis points above CalPERS’ policy benchmark, the announcement showed. Fixed income returned of 0.4 percent for the year.

In terms of funded status, CalPERS has improved compared to last year. The pension is an estimated 71 percent funded, which is an increase of three percentage points compared to the prior fiscal year. According to CalPERS, this is based on a seven percent discount rate.

The organization is still focusing on closing its liability gap in the coming years.

“This will take time and will require us to explore new, forward-thinking approaches to our investments, particularly in private equity,” said Marcie Frost, CalPERS chief executive officer, in a statement. “Our primary goal is to ensure that our fund is strong for years to come.”

In the fiscal year ending June 30, 2017, the pension fund earned 11.2 percent. It’s public equities performed especially well last year, recording a net return of 19.7 percent.

Meanwhile, the private equity program netted returns of 13.9 percent that year. Still, the pension fund’s assets under management have increased handsomely, as they were $323 billion at the end of the 2017 fiscal year.