CalSTRS Posts 21 Percent Investment Return for the 2006-07 Fiscal Year
Portfolio Doubles Size From October 2002 Stock Market Drop
SACRAMENTO, CA – The California State Teachers’ Retirement System (CalSTRS) posted a 21.0 percent return on investments, adding $26 billion to the fund with $170.4 billion in assets as of June 30, 2007. The nation’s second-largest public pension fund doubled its portfolio in four and a half years following the U.S. stock market’s steep decline in October 2002.
This fourth straight year of double-digit returns, including 13.2 percent last year, gives CalSTRS a three-year average return of 15.1 percent, five-year average return of 13.1 percent and a 10-year average return of 9.0 percent.
“The portfolio just keeps growing, which is not only a cause for celebration, but also a source of security to our members. These numbers call out the fact that a professionally managed defined benefit plan can produce results that are nearly impossible for individual investors to achieve,” said Jack Ehnes, CalSTRS chief executive officer. “Expert portfolio oversight, attention to improving holdings’ corporate governance practices and insightful business decisions help create results that regularly surpass market benchmarks.”
The positive fiscal year-end returns are attributed partly to decisions to keep the amount invested in international stocks and real estate above their target asset allocation ranges while funds invested in fixed income were kept at the bottom of the target range. Good performance by both internal and external investment managers are another leading factor that added value in fiscal year 2006-2007.
“By any measure, this will go down as one of our most spectacular years. We played it smart when the opportunities arose and it demonstrates a consistent flow of great investment decisions over the last five years,” said Christopher J. Ailman, CalSTRS chief investment officer. “The CalSTRS board deserves credit for giving us the tools to attract and retain quality staff and to set the right benchmarks and structure to succeed.”
All five asset categories exceeded their respective benchmarks with the entire portfolio’s 21.0 percent return beating its benchmark of 17.5 percent.
- The real estate portfolio posted a 32.9 percent return, outperforming its benchmark, the NCREIF index, which posted a 16.6 percent return.
- International stocks posted a 30.2 percent return, narrowly exceeding its benchmark, the MSCI All Country Free (excluding U.S.) of 30.0 percent.
- Assets in alternative investments posted a return of 27.6 percent, beating its custom benchmark of 6.6 percent.
- The U.S. stock portfolio posted a 20.9 percent return. This beat the CalSTRS benchmark, the Russell 3000 excluding Tobacco Index, which was 19.9 percent.
- The fixed income portfolio at 6.5 percent edged past its benchmark, the Lehman Aggregate excluding Tobacco Index, at 6.2 percent.
The fund’s performance in fiscal year 2006-07 again exceeded the 8 percent average annual return necessary to meet projected benefit obligations to the system’s current 795,000 members and beneficiaries.
The $170.4 billion portfolio ended fiscal year 2006-07 with 41 percent in U.S. stocks, 21 percent in international stocks, 20 percent in fixed income, 10 percent in real estate, 7 percent in alternative investments and 1 percent in cash.
The California State Teachers’ Retirement System administers retirement, disability and survivor benefits for California’s 795,000 public school educators and their families from the state’s 1,400 school districts, county offices of education and community college districts.