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CalPERS earned 1.1% return on investments in 2011

 The nation’s largest public pension fund, the California Public Employees’ Retirement System, posted a low, single-digit return on its $229.5-billion investment portfolio in 2011, Chief Investment Officer Joseph Dear told his board.

The giant fund, which provides retirement and other benefits for 1.6 million state and local government employees, saw its portfolio grow by just 1.1% in the calendar year that ended Dec. 31, Dear said at a board meeting in Monterey.

During the 2011 calendar year, CalPERS lost 7.95% in public equity investments and earned approximately 12.37% on its private equity investments (through the third quarter). It earned 12.38% on bonds, 9.92% on real estate and lost 2.29% on hedge fund investments.

CalPERS overall calendar year earnings were far below the estimated average annual return of 7.75% that the fund’s actuaries say they need to meet current and future obligations to its members.

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While that beat CalPERS benchmark of .91% for similar large investors, the 2011 earnings were far below the 12.6% return for calendar year 2010 and 12.1% for 2009.

The calendar year figures, however, are used only as indicators, a CalPERS spokesman said. The fiscal year returns, posted as of June 30 of each year, are the legal basis for annual decisions by the CalPERS board to raise or lower the contributions it receives from 3,100 participating government agencies, including the state of California.

On June 30, the end of the last fiscal year, CalPERS had a return on its investments of 20.9%, its best annual showing in 14 years. It had a return of 11.6% for fiscal year 2010 and a massive loss of 23.4% for fiscal year 2009.

Last fiscal year’s strong showing, combined with the signing of a number of state labor contracts that increased the amount that employees contribute to their own retirements, allowed CalPERS to lower by $170 million the amount it sought in the current budget from the state government.

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This year the state contribution totaled $3.51 billion.

Next year’s contribution will be determined in the late spring.

 

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