July 13--The California Public Employees' Retirement System said its fund returned just 2.4% on its investments for the year ended June 30, a huge miss from its 7.5% investment target and a worrisome result for California taxpayers who must make up for any shortfalls in funding pensions.
CalPERS said the results, which are preliminary, were dragged down by weakness in the global economy. The nation's largest public pension fund has about 54% of its assets in equity investments, and that portfolio returned just 1%, underperforming its benchmark, which returned 1.3%.
CalPERS officials, in their release Monday, pointed to the portfolio's stronger performances in recent years, including over the three- and five-year periods in which it exceeded benchmarks modestly.
"Despite the impact of slow global economic growth and increased short-term market volatility on our fiscal year return, the strength of our long-term numbers gives us confidence that our strategic plan is working," said Ted Eliopoulos, CalPERS' chief investment officer.
CalPERS said the performance of its portfolios overall, valued at a total of about $301 billion, was close to its benchmark, which came in at 2.5% for the period.
A surprising bright spot came from the much maligned real estate portfolio, now about 10% of the overall portfolio. It is still recovering from the financial crisis of 2008. Real estate had posted below-par results through the first 10 months of the fiscal year.
Its returns for the year, however, came in at 13.5%, beating its benchmark by 1.14 percentage points, a significant margin.
A less-than-stellar segment was the private equity portfolio, about 9% of the fund, which posted returns of 8.9% for the year, missing the benchmark by 2.21 percentage points, a wide margin.
The private equity industry has come under fire for failing to disclose -- even to its investors -- its share of profits in its deals, known as carried interest. CalPERS has said that it plans to disclose the amount of carried interest it pays to private equity managers this fall.
Eliopoulos has pledged to trim the number of private equity and other portfolio managers.
