CalSTRS Posts 10.2 Percent Year-End Returns

News release

 Sacramento, CA  – The California State Teachers’ Retirement System, second largest public pension fund in the nation, posted a 10.2 percent return for 2005, achieving $137.1 billion in assets on December 31, 2005, an $11 billion increase over 2004.

“Our returns are obviously great news for our members and demonstrate in these times of national pension debate the extraordinary value created by professional investment management in public pension defined benefit plans,” said Jack Ehnes, CalSTRS chief executive officer. “The ability to manage large assets, through an expert investment staff, in a highly cost efficient manner with broad diversification and managed risk creates results like these that surpass market benchmarks and produces in the end the financial security everyone deserves.”

“This is the third year in a row of positive returns,” stated Christopher J. Ailman, CalSTRS chief investment officer. “The broad stock markets gained very marginal returns in past years while the CalSTRS investment portfolio consistently beats our own policy benchmarks. These record breaking numbers are the rewards reaped from fine tuning each asset class and creatively seeking alpha throughout the portfolio. We are elated by the fund’s performance, seeing it as a validation of our disciplined approach.”

All asset categories beat their benchmarks for the one-year period ending December 31, 2005.

  • The U.S. stock investments increased by 6.16 percent, beating the fund’s Russell 3000 (excluding tobacco) index performance of 5.89 percent.
  • Assets in alternative investments increased by 34.34 percent, a 25.31 percent gain over the CalSTRS AI Index custom benchmark.
  • The real estate portfolio posted a 36.45 percent return, nearly doubling its State Street Real Estate Index benchmark of 19.13 percent.
  • The fixed income assets out-performed the custom benchmark, the Lehman Brothers’ U.S. Aggregate + High Yield Cash Pay Index (ex-tobacco), by a margin of .32 percent.
  • International stocks gained 17.34 percent last year, edging out its benchmark, MSCI All Country Free (excluding U.S.), by .27 percent.


The positive year-end returns are attributed to an increase in active management in both U.S. and international stocks. In the real estate portfolio tactical moves within the real estate portfolio and the strength of the U.S. market were the contributing factors for real estate. Prudent selection within the alternative investment asset class was cited as the number one factor that added value in 2005.

The portfolio ended 2005 with 42.5 percent in U.S. stocks, 22.6 percent in international stocks, 22.8 percent in fixed income, 6.1 percent in real estate, 5.4 percent in alternative investments and 1 percent in cash.

The fund’s performance in 2005 again exceeded the 8 percent annual return required to meet projected benefit obligations to the system’s 776,000 members and beneficiaries.

With a $137 billion investment portfolio, the California State Teachers’ Retirement System is the second-largest public pension fund in the United States. It provides retirement, disability and survivor benefits to California’s public school educators from kindergarten through community college.