CalSTRS Retired Educator - Winter 2007 eNewsletter

The CalSTRS portfolio has reached a record high of more than
$153 billion. This is a robust gain of $10.6 billion just five short months after the end of the fiscal year, which was also full of good news for the financial future of California’s educators.

Healthy Return for 2006

Fiscal year 2006 concluded with a healthy 13.2 percent return on investments, adding $13.5 billion to the fund and ending the year
with $142.7 billion in assets. Real estate, alternative investments and international stocks fueled this fourth straight year of positive returns.

The Fund’s performance in 2005-06 again exceeded the 8 percent average annual return necessary to meet projected benefit obligations to the system’s current 776,000 members and beneficiaries.

High Yields with High Efficiency

Good investment decisions are only part of the equation for strengthening the trust fund. It also takes efficient and wise use of investment resources. What does it cost to achieve a 13.2 percent return for CalSTRS members? How does $1.49 sound? According to Cost Effective Measurement Benchmarking, Inc. of Toronto, CalSTRS’ asset management costs are about $1.49 per $1,000 invested. This is less than half the average investment costs of other pension funds similar to CalSTRS. These funds spent an average of $3.08 per $1,000 invested.

For the past seven years, CalSTRS has used Cost Effective Measurement Benchmarking, Inc. to monitor plan costs. The CEM analysis compares CalSTRS to a peer group of 17 other defined benefit fund sponsors, rating the cost and performance of the CalSTRS portfolio against those of its peer group, which includes funds like GE, GM, and CalPERS.

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