CalSTRS Calendar Year-End Investment Returns Show Slight Gains
Tumultuous 2011 ends with CalSTRS investments returns slightly positive

News release Ricardo Duran

WEST SACRAMENTO, CA – Investment returns for the California State Teachers’ Retirement System (CalSTRS) ended the 2011 calendar year posting a 2.3 percent gain, in a year of extreme market volatility.

CalSTRS’ investment portfolio was not immune to the significant daily market fluctuations common during the last half of the year. In July 2011 CalSTRS investment portfolio stood at $152.7 billion, losing $7.9 billion by December 2011.

“We continue to feel the effects of the most precarious markets in decades.Even though overall we’ve earned positive returns, the numbers reinforce the fact that CalSTRS cannot rely solely on investments to restore the fund’s long-term viability,” said CalSTRS Chief Executive Officer Jack Ehnes. “It is our fiduciary responsibility to our members to protect the long-term health of the fund. The funding shortfall can be managed, but the Governor and Legislature must develop a specific funding plan, as only they have the authority to do so.”

The financial crisis had a significant impact on CalSTRS’ overall funding. CalSTRS latest valuation, a snapshot of the fund’s health, showed the system’s funding level had dipped from 78 percent as of June 30, 2009 to 71 percent as of June 30, 2010 leaving the fund with a $56 billion funding shortfall. Funding levels are a measure of the ability of assets at hand to pay for future obligations. Investment returns still accounted for the majority of the $10.1 billion in benefits paid out in 2010-11.

The total portfolio exceeded its benchmark by 0.5 percent. The private equity and U.S. equity portfolios exceeded their benchmarks with a 9.9 percent return and a 0.9 percent return, respectively.

“Our three-year rolling return jumped 8.0 percent over the previous year because we are finally moving past the 2008 financial meltdown,” stated CalSTRS Chief Investment Officer Christopher J. Ailman. “The focus for fiscal year 2011-2012 centers on making the portfolio more nimble in a highly dynamic investment climate. Today’s globally interconnected markets are drivers of the big highs and lows that happen in an instant. We must respond with deliberate speed to make timely, solid decisions that add value to the portfolio,” Ailman added.

Calendar Year 2011 Investment Performance by Asset Class

Asset Class Return Benchmark Over Performance (Under Performance)
U.S. Equity 0.9 0.6 0.3
Non-U.S. Equity -14.1 -14.1 0
Fixed Income 7.2 7.7 (0.5)
Private Equity 9.9 3.4 6.5
Real Estate 15.0 16.1 (1.1)
Inflation Sensitive 9.2 10.2 (1.0)
Liquidity (cash) 8.3 0.1 8.2

CalSTRS investment performance over one-year yielded a return of 2.3 percent, over the last five years the return was 0.7 percent. The 10-year return was 5.4 percent and the 20-year was 7.2 percent.

The California State Teachers’ Retirement System, with a portfolio valued at $144.8 billion as of December 31, 2011, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of a traditional defined benefit, cash balance and defined contribution plan, as well as disability and survivor benefits. CalSTRS serves California’s 856,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.