CalSTRS announces one-year rate of return on investments of 27%

CalSTRS on Monday reported a one-year 27% return on investments for the year ending June 30, quadruple the target 7% annual return that the pension fund serving California teachers and administrators builds into investment assumptions.

The gains were fueled by a 42% gain in publicly traded stocks, which make up half of CalSTRS’ investment portfolio, and a 52% gain in private equities, which comprise 12% of the total.

“We’ve built our portfolio for long-term performance, but this year’s results were nothing short of spectacular,” said Chief Investment Officer Christopher J. Ailman. “These are record-breaking numbers — the highest returns we’ve seen since the late 1980s.”

The $63 billion increase in value raised the level of assets to $309 billion, 25% above a year ago and double what it was a decade ago, according to a news release.

CalSTRS, the nation’s second-largest public employee pension system, serving 975,000 members, is still recovering from a precarious financial position — a combination of increased pension benefits granted by the Legislature two decades ago plus plummeting stock market and real estate values during the Great Recession. In 2009, the value of assets fell to $118 billion.

That led to legislation in 2012 laying out a series of increases that more than doubled annual pension contributions by school districts, which was needed to achieve full funding by 2046. CalSTRS has not yet recalibrated the impact of this year’s record return on its ability to meet long-term obligations. A year ago, assets had reached 67% of full funding.

By comparison, CalPERS, which covers state employees and classified school workers, such as teacher’s aides and bus drivers, recorded a 21% rate of return for the year ending June 30. That increase raised its asset value from 71% to 82% of full funding.