CalSTRS released its latest semi-annual performance reports to the Teachers’ Retirement Board Investment Committee during the March meeting.
While a volatile 2022 calendar year led to a negative 6.7% return, CalSTRS is built to weather difficult economic times and surpassed its 7% long-term goal over the past three-, five-, 10- and 30-year periods:
- 7.2% annualized return over the past three years.
- 7.2% annualized return over the past five years.
- 8.8% annualized return over the past 10 years.
- 7.8% annualized return over the past 30 years.
These returns demonstrate how portfolio diversification has helped—and is expected to continue to help—the Teachers’ Retirement Fund minimize the impact of volatility in public markets.
The Semi-Annual Performance Report (a summary of each asset class), the Real Estate Strategy report and the Private Equity performance report aid the Investment Committee in overseeing the fund. The executive summary reflects the six-month period ending December 31, 2022. Performance data in the Private Equity and Real Estate reports is lagged by one quarter to September 30, 2022, since these assets do not undergo valuation as frequently.
Here is one highlight from each report:
Semi-Annual Performance Report
The CalSTRS Investment Portfolio produced a one-year return of -6.7%, outperforming the median return of the largest public pension funds in the U.S. They returned -7.8%, according to the State Street Master Trust Universe of Funds over $10 billion. The total CalSTRS Investment Portfolio outperformed the policy benchmark over the past three-, five- and 10-year periods.
Real Estate strategy
The Real Estate portfolio outperformed its benchmark of the NCREIF Open End Diversified Core Equity, an index of investment returns of the largest private real estate funds pursing lower-risk strategies over the three-, five- and 10-year periods.
Private Equity performance
CalSTRS staff have increased the pace of adding co-investments, which now represent approximately 21% of the Private Equity Portfolio. Co-investments are minority investments in a company or asset made by investors alongside a private investment management firm. These investments are impactful for the Teachers’ Retirement Fund because they allow CalSTRS to make investments with little or no management fees or incentive fees, which are known as carried interest.
New editions of these semi-annual reports will be presented to the board at the September 2023 meeting.