Portfolio Beats Benchmarks in 4 of 5 Investment Categories

Sacramento, CA – The California State Teachers' Retirement System posted a 13.1 percent return for 2004, reaching a record high of $126.1 billion in assets on December 31, 2004. Earning $13.5 billion more than the previous year, the investment portfolio outdid its benchmarks in four of its five investment categories.

"This second year of above average returns shows we are fully recovered from the recent market downturn," said Christopher J. Ailman, CalSTRS Chief Investment Officer. "The savvy work by investment staff and managers added $1.8 billion to the portfolio over just copying our benchmarks’ holdings. Our professionals made smart decisions using our diligent process and discipline to ensure our members’ financial security."

Four of the fund's five asset categories posted double-digit returns for the one-year period ending December 31, 2004, with U.S. stocks, fixed income, real estate and alternative investments beating their benchmarks.

• The U.S. stock investments increased by 12.4 percent, beating the fund's Russell 3000 (excluding tobacco) index performance of 11.9 percent.



• Assets in alternative investments increased by 22 percent, more than doubling its custom benchmark's return of 9.8 percent.



• The real estate portfolio continues its string of double-digit returns over the last several years, posting a 15.4 percent return. The CalSTRS custom benchmark for real estate had a 12.44 percent return.



• The fixed income assets inched out ahead of its benchmark, Salomon Large Pension Fund, by .1 percent with a 4.9 percent return.



• While international stocks gained 20.4 percent last year, it missed matching its benchmark, MSCI All Country Free (excluding U.S.), by .8 percent.

The fund's performance in 2004 exceeded the 8 percent average annual return required to meet projected benefit obligations to the system's 750,000 members and beneficiaries.

The $126.1 billion portfolio ended 2004 with 43.7 percent in U.S. stocks, 23.9 percent in international stocks, 22.5 percent in fixed income, 4.4 percent in real estate, 4.6 percent in alternative investments and .9 percent in cash.

CalSTRS is the third-largest public pension fund in the United States. It provides retirement, disability and survivor benefits to California's public school teachers from kindergarten through community college.