The investment return for the California Public Employees Retirement System, the nation's largest public pension fund, fell nearly 1% during 1994, its worst performance in a decade.
Sheryl Pressler, chief investment officer for the $80-billion CalPERS, said the "weak fund returns were due in large part to a substantial decline in the price of bonds caused by a tremendous rise in interest rates."
"1994 was a difficult environment to make money," she told CalPERS' 13-member board at a meeting Wednesday.
Money market investments were up 4.4%, domestic real estate rose 3.3% and international investments showed a 2.6% increase.
But, Pressler said, CalPERS' two major holdings showed declines--a 4.4% drop in U.S. bonds and a 0.1% decrease for U.S. stocks.
CalPERS has lost none of its characteristic outspokenness in dealing with corporate executives and boards, however. The fund this week rebuked directors of Bankers Trust New York Corp. for paying Chairman Charles Sanford $4.8 million last year, when the bank's stock fell 30%. In a March 13 letter to Sanford, CalPERS Chief Executive James E. Burton also accused the firm of ignoring CalPERS' requests to make its board of directors more responsive to shareholders.
The pension fund's investments generally have been strong--over the past decade they have increased by roughly 12% annually.
But 1994 was different, Pressler said.
"In an environment where the returns for the assets are low, there has been a tendency for some organizations to take on additional risk," Pressler said, citing Orange County and Barings, the British investment firm.
Not so with CalPERS, she added.
"The taking on of additional risk does not occur here," she said.