Calpers Earned 12.5% Return in 2010, Investment Chief Dear Says

The California Public Employees’ Retirement System, the largest U.S. public pension, earned a 12.5 percent return in 2010, led by gains in private equity and U.S. stocks, Chief Investment Officer Joe Dear said.

The $228 billion pension fund earned 17.3 percent from domestic equity and 21.5 percent in alternative investments such as private equity, Dear said today. Its real-estate portfolio lost 5 percent while its fixed-income investments gained 12 percent.

“Overall though we’ve had relatively solid growth,” Dear told the fund’s governing board during a meeting in Monterey, California.

The double-digit returns may help the pension plan parry criticism that it relies on overly optimistic assumptions that have hidden the true size of the shortfall in the retirement system, a refrain among those who have argued that public pensions pose a looming threat to taxpayers.

Calpers lost 23.4 percent in the fiscal year that ended June 30, 2009, its worst one-year decline on record. That’s left it with only about 70 percent of the money it needs to pay for benefits.

Since the start of the fiscal year July 1, the fund has earned 13.96 percent, according to Calpers’ data. It returned 12.1 percent in 2009 and 13.3 percent in its fiscal year that ended June 30.

The latest figures mean that Calpers still has lost 2.86 percent for the three calendar years ended Dec. 31 and has gained just 4.29 percent for the last 10 years. The fund assumes it needs to earn 7.75 percent annually to cover the cost of benefits.

Calstrs’ Returns

The California State Teachers’ Retirement System, the second-largest U.S. public pension, said today it earned 12.7 percent last year, bringing its $146.4 billion asset value to where it was in October 2008.

The pension fund was short by about 22 percent in the amount of money it needs to pay benefits, as of June 30, 2009, the latest available figures for unfunded liabilities. It said it will likely need to ask state lawmakers for more money from the state and school districts.

“This is very encouraging news but the historic market declines of the 2008-09 financial crisis showed us that Calstrs cannot solely invest its way to healthy long-term funding,” Chief Executive Officer Jack Ehnes said.

Calstrs’ U.S. stocks earned 17.2 percent, followed by a 16.9 percent return in its private-equity portfolio. International stocks gained 12.8 percent while bonds earned 8 percent and real-estate holdings yielded 0.01 percent.

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