CalPERS Investments Post Gain for First Time in Three Years

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.