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Investment reports show continued steady pace of returns

CalSTRS released its latest semi-annual performance reports to the Teachers' Retirement Board Investment Committee during the March meeting.

The reports show that efforts by CalSTRS to build a portfolio that can both weather difficult economic times and take advantage of better stretches leads to continued solid returns.

CalSTRS returned 9.2% on its portfolio investments in 2023 and surpassed its 7% long-term goal over the past five, 10 and 30 years. These performances are more indicative of the total fund’s sustainability than volatile single-year results.

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. While the Semi-Annual Performance Report reflects the six-month period ending December 31, 2023, performance data in the Private Equity and Real Estate reports is lagged by one quarter to September 30, 2023, since these assets do not undergo valuation as frequently.

Here is one highlight from each report:

Semi-Annual Performance Report

The 9.2% return from 2023 outperformed the median return of the largest public pension funds in the U.S., and the total CalSTRS Investment Portfolio outperformed the policy benchmark and the State Street universe median over the past three-, five- and 10-year periods.

Real Estate Strategy Report

The Real Estate Portfolio beat its benchmark of the NCREIF Open End Diversified Core Equity, an index of investment returns of the largest private real estate funds pursuing lower-risk strategies, over three-, five- and 10-year periods.

Private Equity Performance Report

CalSTRS has increased co-investments, which represent approximately 22% 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 2024 meeting.