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Calpers Earns 1.9% in First 3 Quarters as Stocks Falter

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May 7 (Bloomberg) -- The California Public Employees’ Retirement System, the largest U.S. pension, earned less than 2 percent on investments in the first three quarters, below its target rate after its stock portfolio faltered.

The fund, with $233.6 billion in assets, returned 1.9 percent in the nine months ending March 31, according to a performance summary posted on its website today. The fund’s stock holdings, which make up half of its assets, lost 1.6 percent during that period. Fixed-income earnings grew 8.4 percent. Calpers, as the system is known, also lost 11 percent in its $2.1 billion forestland portfolio.

Calpers’s governing board in March lowered its forecast for investment returns to 7.5 percent from 7.75 percent. The rate is used to calculate how much the plan will need to cover promised benefits, and what employers such as the state and local governments must contribute.

“It’s important not to judge our performance quarter by quarter but to look at our long-term track record which has outperformed our expected returns,” Calpers Chief Investment Officer Joe Dear said in a e-mailed statement. “Calpers by its nature is a long-term investor and we believe that will drive the health of the fund, not short-term market cycles.”

Through March 31, Calpers earned 13.5 percent over three years and 5.7 percent over 10 years. It earned 20.7 percent in the fiscal year that ended June 30, its best result in 14 years, led by stocks and private equity gains.

California’s state pensions in 2010 had 80.7 percent of what is needed to pay promised benefits, down from 86.6 percent in the preceding year, according to an annual study by Bloomberg Rankings. The median for all states was 74.6 percent, the data show.

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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