After two years of losses, the investments of the California Public Employees’ Retirement System, the largest U.S. pension fund, gained 3.9% in the year ended June 30 as gains in the stock and bond markets boosted returns.
CalPERS, with $144.8 billion invested on behalf of 1.3 million state and local government employees, had lost 5.9% in the previous year.
The CalPERS gain “shows hope for continued recovery in the markets,” Mark Anson, chief investment officer of the pension fund, said in a statement Tuesday. The retirement system has “remained confident in the long-term return of the equity markets and the economy.”
Investments by the California State Teachers’ Retirement System, the third-largest U.S. pension fund, also gained for the first time in three years with a 3.4% increase, CalSTRS said in a statement.
Both pension funds’ returns were below the 4% median returns on public institutional assets totaling at least $1 billion for the year ended June 30, according to Wilshire Associates’ Trust Universe Comparison Service. The median rate of return for all public trusts, regardless of size, was 3.9% for the same period, according to Wilshire’s figures.
About 60% of CalPERS’ assets are invested in U.S. and international stocks. The fund’s U.S. stocks, most of which are passively managed in an index fund, rose 1.4%, compared with a year-earlier loss of 16.8%, the statement said.
A global fixed-income portfolio rose 16.9% while a customized benchmark for such investments increased 15.5%, CalPERS said. The pension fund invests 27% of its assets in U.S. and international bonds.
Real estate investments, which represent 8% of the fund’s assets, rose 6.8% for the year. The remainder of the fund’s assets, invested in private equity and venture capital investments, dropped 10.6%.
CalSTRS, with $100 billion invested on behalf of teachers, said bond investments provided the biggest gain in the year ended June 30, rising 13.2%. CalSTRS allocates 27% of its assets to bonds. Its stock holdings, which are 41% of its portfolio, rose 1% last year.