Calpers Misses 7% Return a Citing ‘Volatile’ Year for Markets
Calpers Misses 7% Return a Citing ‘Volatile’ Year for Markets
(Bloomberg) -- The largest U.S. pension fund fell short of its 7% investment return as the market downturn of late 2018 pummeled stocks.
The California Public Employees’ Retirement System earned 6.7% for the fiscal year ended June 30, marking the first time in three years that it missed its target, according to preliminary figures released Thursday.
Stocks, which made up around half of the $370 billion in holdings as of June 30, returned 6.1% during the 12-month period. Fixed-income was the best-performing asset class, generating 9.6%. Private equity investments returned 7.7%.
“This was a very volatile year for financial markets, but I’m pleased with how we focused on the performance of the total fund,” Ben Meng, chief investment officer, said in a statement. “While we did not achieve our 7% actuarial return target this fiscal year, I can’t stress strongly enough that we are long-term investors. We make decisions based on an investment horizon that stretches across years and even decades.”
Calpers had about 70% of its long-term liabilities, compared with 71% at the end of fiscal 2018.
Public pensions have struggled to meet liabilities through investments while facing a growing wave of retirees entitled to generous defined benefits. The average U.S. public pension had 72.5% of its long-term obligations as of the end of fiscal 2018, according to the Center for Retirement Research at Boston College.
Pension managers face dimming return prospects amid low interest rates on fixed-income holdings and an eventual end to the U.S. bull stock market that’s now the longest since World War II. Calpers expects to earn 6.1% over the next decade, not 7%, Meng said during a June board meeting in Sacramento.
The California State Teachers’ Retirement System, the second-largest public pension with $226 billion as of May 31, is releasing its fiscal year-end returns next week. The third-largest system, the $210 billion New York State Common Retirement Fund, earned 5.23% for the fiscal year through March 31.
To contact the reporter on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net
To contact the editors responsible for this story: Alan Mirabella at amirabella@bloomberg.net, Josh Friedman, Dan Reichl
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