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CalPERS says investments grew 12.5% in 2010

The smaller CalSTRS ends the year with a 12.7% return as the nation's two largest public pension funds get back on track after suffering steep losses during the recession.

January 21, 2011|By Marc Lifsher, Los Angeles Times

Reporting from Sacramento — Investment returns at the nation's two largest public pension systems are back on track after suffering steep losses during the Great Recession.

The California Public Employees' Retirement System reported Thursday that its investments grew 12.5% in the calendar year ended Dec. 31. That's in line with a 12.1% gain posted for calendar year 2009.

The smaller California State Teachers' Retirement System ended the year with a 12.7% return.

Both funds' total performance bested their selected market benchmarks.

"We repositioned our portfolio to take full advantage of the overall gains in the market last year," CalPERS Chief Investment Officer Joseph Dear said. "The strong returns we saw in 2010 prove that our top-to-bottom evaluation of all our investments is paying off for our beneficiaries and our employers."

As of Jan. 18, CalPERS' total investment portfolio was valued at $228.5 billion. That's still 12% off its historic high of $260 billion in October 2007 but considerably better than the recession low of $160 billion in March 2009.

Last year CalPERS' investment performance topped market benchmarks in all areas except real estate. Global stocks returned 14.6%, fixed income and bonds 11.6% and so-called alternative investments, such as venture capital and private equity, returned 21.5%.

Only CalPERS' real estate investments lost money last year, falling 5.1%, compared with a market benchmark that grew 9.3%.

CalPERS' performance for both its alternative investments and real estate reflected returns through the third quarter last year because of a lag in reporting all financial data.

For CalSTRS, investment growth has pushed the fund back to its October 2008 level at $146.4 billion, strengthening its ability to provide retirement, disability and survivor benefits for its 852,000 educators at 1,600 school districts, community colleges and county offices.

"This is very encouraging news, but the historic market declines of the 2008-09 financial crisis showed us that CalSTRS cannot solely invest its way to healthy long-term funding," Chief Executive Jack Ehnes said.

Ehnes and the board of directors have told the Legislature that CalSTRS needs a 15% boost in employer contributions beginning this year. The fund estimates that it faces a $40.5-billion shortfall in the money it needs to meet its long-term financial obligations.

For its part, CalPERS already is getting $400 million more this year in contributions from the state government. Employer contribution rates for local governments are expected to increase in July by an as-yet-undetermined amount.

CalPERS provides retirement benefits to 1.6 million state, public school and local public agency workers, retirees and their families.

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