CalSTRS uses the dollar-weighted internal rate of return (IRR) to
measure portfolio performance, as recommended by the Association
of Investment Management and Research.
The CalSTRS IRR calculation method may differ from the methods
used by the General Partner or other Limited Partners.
CalSTRS maintains records, including the IRR, for each limited
Factors Influencing IRR Calculations
There is no industry-standardized method for valuation or
reporting, which makes comparisons of these numbers difficult.
All of the following can create differences in IRR calculations:
The accounting treatment of carried interest
Partnership management fees
Other partnership expenses
Sale of distributed stock
In addition, the purchase of secondary interests makes for unique
comparison problems due to the specific pricing and timing
characteristics of the transaction when contrasted with the
Limited Partners Investment.
IRR Over Time
The actual IRR performance of any limited partnership is not
known until the final liquidation of the partnership, typically
over 10 to 12 years. Until the liquidation takes place, the IRR
is only an interim estimated return.
The IRR calculated for a partnership in the first three years of
its life are relatively meaningless given the “J-curve effect.”
The J-curve phenomenon is the effect of the cash-flow behavior of
a partnership. It can be summarized as the first year’s
investment expenses of investing in a fund that has yet to
harvest its capital gains in the future. This normally translates
into a negative IRR in the early years of the fund. The plot of
the partnership values over time generally resembles a letter J.
Performance Report Disclaimer
Please note that none of the information contained in the Private
Equity Portfolio Performance Report has been reviewed or approved
by the General Partners of the funds.
Electronic privacy is crucial for the ongoing success of the
Internet as a convenient means to provide customer service. Your
personal information will be used only to conduct CalSTRS-related
WEST SACRAMENTO, CA – The California State Teachers’ Retirement
System (CalSTRS) today announced that, effective January 1, 2014,
CalSTRS Retirement Progress
Reports (RPR) will be available exclusively online, unless a
paper version is requested. The change is enacted under
Assembly Bill 989.