WEST SACRAMENTO, Calif. – Continued growth in the equity market, coupled with a bias to U.S. companies, fed a second year of healthy investment returns at the California State Teachers’ Retirement System (CalSTRS), which closed the 2013-14 fiscal year with an 18.66 percent return on its investments.
WEST SACRAMENTO, Calif. – The California State Teachers’ Retirement System (CalSTRS) today announced the election of Corporate Governance Investment Officer Aeisha Mastagni to the Board of Directors of the International Corporate Governance Network (ICGN).
WEST SACRAMENTO, Calif. – The California State Teachers’ Retirement System (CalSTRS) today announced the Monday, June 30, opening of its Irvine Member Service Center. This is the fourth full-service member center, with other service centers in Santa Clara, Glendale and the CalSTRS Headquarters in West Sacramento.
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 partnership.
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.
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