CalSTRS Reports 6.8% Investment Return for FY 2018-19
CalSTRS returns close to target despite market volatility.
WEST SACRAMENTO, Calif. (July 23, 2019) – The California State Teachers’ Retirement System today announced a 6.8% net return on investments for the fiscal year ending June 30, 2019, and recorded its highest-ever fund value at $236.9 billion.
The full fund value is comprised of state and employer contributions, teacher contributions and investment returns.
“Returns are a key factor in meeting our pension obligations, but they are only one part of the shared responsibility,” said Chief Executive Officer Jack Ehnes. “The $5.1 billion in additional pension payments in the 2019-20 state budget demonstrate the commitment and high priority California places on its teachers’ retirement security.”
CalSTRS is a long-term investor with a goal of achieving an average of 7% return over a multiyear horizon to meet pension obligations for current and future retirees. The 3-year, 10-year and 25-year fund performance are all above the 7% investment return assumption, at 9.7%, 10.1% and 8.0%, respectively. The 5-year fund performance is 6.9% and the 20-year fund performance is 6.2%.
“It was a roller coaster year and a very challenging environment in which to generate returns,” said Chief Investment Officer Christopher J. Ailman. “Thanks to the in-house expertise of our investment team, we were able to come very close to our assumed rate of return despite the instability of the market.”
Following are returns and benchmarks by individual asset class. Asset class allocations are available online:
CalSTRS Fiscal Year 2018–19 Returns (Net of Fees)
Asset Class and Benchmark Performance Breakdown
| CalSTRS Asset Class/Strategy | 10-Yr Return | 5-Yr Return | 3-Yr Return | FY 2018-19 Return | FY 2018-19 Custom Benchmark Return | FY 2018-19 Over/Under Performance |
|---|---|---|---|---|---|---|
| Total Public Equity | 11.8% | 7.2% | 12.0% | 5.3% | 5.2% | 0.1% |
| Private Equity* | 13.5% | 10.6% | 13.8% | 10.5% | 9.6% | 0.9% |
| Real Estate* | 8.2% | 9.9% | 8.9% | 8.2% | 6.5% | 1.7% |
| Inflation Sensitive | ^ | 4.5% | 7.9% | 6.0% | 2.4% | 3.6% |
| Risk Mitigating Strategies | ^ | 1.4% | 0.1% | 8.3% | 7.2% | 1.1% |
| Innovative Strategies | 2.7% | 5.5% | 8.8% | 9.2% | 5.1% | 4.1% |
| Fixed Income | 4.8% | 3.4% | 3.1% | 8.1% | 7.9% | 0.2% |
| Total Fund Performance | 10.1% | 6.9% | 9.7% | 6.8% | 6.5% | 0.3% |
^ Newly funded strategies lack 10-year return sample size.
Over the course of fiscal year 2019-20, CalSTRS is expanding its efforts in the Collaborative Model, an internally led approach to engaging in the investment marketplace that identifies higher-return, lower-cost strategies. Additionally, CalSTRS will complete its Asset Liability Management Study to set the best mix of investments to meet pension liabilities.
The $5.1 billion in 2019-20 State Budget Supplemental Pension Payments are expected to reduce both the state and employer contributions through the remainder of the CalSTRS Funding Plan by paying down a portion of both the state’s share and the employers’ share of the unfunded actuarial obligation. The Funding Plan, enacted in 2014, puts CalSTRS on the path to full funding by 2046. Currently, CalSTRS is 64% funded.
About CalSTRS
The California State Teachers’ Retirement System is the largest educator-only pension fund in the world. CalSTRS serves California’s more than 949,000 public school educators and their families from the state’s 1,700 school districts, county offices of education and community college districts. A hybrid retirement system, CalSTRS administers a combined traditional defined benefit, cash balance and voluntary defined contribution plan. For more data, download the CalSTRS Fast Facts 2018 brochure.