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CalPERS Returns 6.7 Percent for the Year, Driven by Fixed Income

It was a year of transition for the pension fund, with senior-level staffing changes and a big private equity plan.

The California Public Employees’ Retirement System (CalPERS) reported a preliminary net return on investments of 6.7 percent on Thursday.  

This is compared with the $370 billion retirement system’s 8.6 percent return during the previous year.  

"While we did not achieve our 7 percent actuarial return target this fiscal year, I can't stress strongly enough that we are long-term investors,” said Yu (Ben) Meng, CalPERS’ chief investment officer, in a statement. “We make decisions based on an investment horizon that stretches across years and even decades.” 

The past year has been one of transition for CalPERS: Its former chief investment officer, Ted Eliopoulos, was replaced by Meng during that time, while its chief operating investment officer, Elisabeth Bourqui, left the pension fund in January after just eight months in her role.  

Meanwhile, the pension fund took steps to restructure and expand its private equity portfolio, voting to continue the development of a new investment vehicle that would allow it to invest in longer-term private equity investments and late-stage venture capital.  

According to CalPERS, the fixed income portfolio drove performance, with a 9.6 percent return for the twelve-month period. This is especially impressive when compared to the fixed income portfolio’s returns the year before, which were 0.4 percent, Institutional Investor reported at the time.  

“Our long duration fixed income portfolio contributed positively as interest rates fell,” Meng said in a statement. “And we are pleased with the outcome of some allocation changes made during the year, which we estimate contributed 70 basis points to fund performance.” 

Private equity investments returned 7.7 percent during the past year, while public equities returned 6.1 percent. Both underperformed the previous year, in which private equity investments returned 16.1 percent and public equities returned 11.5 percent.  

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CalPERS’ funded status dropped less than a percentage point year-over-year and now stands at 70 percent, according to its announcement.  

"This was a very volatile year for financial markets, but I'm pleased with how we focused on the performance of the total fund," Meng said in the statement.

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