CalSTRS Releases Fiscal Year 2014-15 Investment Returns
Volatile market drove returns below the actuarially assumed 7.5 percent, but majority of long-term performance remains strong.
WEST SACRAMENTO, CALIF. – Investment returns at the California State Teachers’ Retirement System (CalSTRS) came in at 4.8 percent gross for the fiscal-year-end 2014-15, belying stronger long-term performance for the educator fund with $191.4 billion in assets as of June 30, 2015.
The picture for the fiscal year—July 1, 2014 through June 30, 2015—is of slow U.S. and global growth coupled with global volatility, causing stock market performance to slow considerably. The result for CalSTRS is relatively flat growth with one-year performance falling below its actuarially assumed 7.5 percent rate of return—the first time since fiscal year 2011-12. CalSTRS’ returns reflect the following longer-term performance:
- 12.3 percent over three years
- 12.1 percent over five years
- 7.0 percent over 10 years
- 7.8 percent over 20 years
“Thinking beyond the short term is the cornerstone to the success of a large, mature pension system like CalSTRS and the current year’s performance will not adversely impact the long-term financial health of the system,” said CalSTRS Chief Executive Officer Jack Ehnes. “Coupling realistic long-term investment returns with the gradual, sensible and fair funding plan enacted by the Governor and Legislature last year best serves our member-educators, who depend on CalSTRS for their retirement security and who do not receive Social Security.”
“It’s important to keep in mind that our investment horizon is 30 years and that any single year’s over or underperformance will not make or break us,” said CalSTRS Chief Investment Officer Christopher J. Ailman. “The six-year bull market is admittedly long in the tooth and since the majority of our assets are in stocks, our portfolio will reflect that larger reality.”
Mr. Ailman added: “The investment staff continues the hard work of adding extra value but is driven by the global economy and cannot squeeze 7.5 percent out of a flat global market. Remember, this is a marathon not a sprint. We will continue to focus our efforts on doing what we can to achieve positive performance for the fund and for the benefit of our members.”
Fiscal Year 2014–15 Gross Returns and Performance by Asset Class
|Asset Class||FY 14-15 Return||Benchmark||Benchmark Return||Over/Under Performance|
|Global Equity||3.1%||CalSTRS Custom Global Equity Benchmark||3.0%||0.1%|
|Private Equity*||9.1%||CalSTRS Custom Private Equity Benchmark||7.6%||1.5%|
|Real Estate*||13.4%||CalSTRS Custom Real Estate Benchmark||12.4%||1.0%|
|Inflation Sensitive||-4.7%||CalSTRS Custom Inflation Sensitive Benchmark||0.6%||-5.3%|
|Absolute Return||1.0%||90 day Treasury Bills plus 100 basis points||1.0%||0.0%|
|Fixed Income||2.1%||CalSTRS Custom Fixed Income Benchmark||1.8%||0.3%|
|Total Fund Performance||4.8%||Custom Policy Benchmark||4.6%||0.2%|
*Asset valuations and benchmark returns lag by one quarter.
As of June 30, 2015, the CalSTRS investment portfolio holdings were 57.4 percent in U.S. and non-U.S. stocks, or global equity; 15.7 percent in fixed income; 10.1 percent in private equity; 12.7 percent in real estate; 2.3 percent in inflation sensitive and absolute return assets; and 1.8 percent in cash.
The California State Teachers’ Retirement System is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California’s 879,000 public school educators and their families from the state’s 1,700 school districts, county offices of education and community college districts.