CalSTRS' lacklustre year buoyed by PE

The retirement system’s $21bn private equity portfolio generated a 5.9% return last fiscal year, outperforming its overall portfolio by 4.1%.

The California State Teachers’ Retirement System’s private equity portfolio delivered a 5.9 percent return during the 2011 to 2012 fiscal year, the pension system announced in a statement. 

The system’s investment portfolio had a lacklustre year overall, generating only a 1.8 percent return. That is well below CalSTRS’ actuarial assumed rate of 7.5 percent, and 150 basis points below its policy benchmark. CalSTRS’ three-year return notched a relatively solid 12 percent. 

“A year like this one underscores the wisdom of viewing CalSTRS’ performance in the long term and refraining from using one given year’s performance as the gauge for how well the fund is doing,” said CalSTRS chief executive Jack Ehnes in a statement.

CalSTRS attributed its portfolio’s middling performance to volatility in Europe, slower growth in China and India, the US credit downgrade and a sluggish economy, according to a statement. 

The $150 million retirement system is considered one of the premier limited partners in the private equity sector. CalSTRS’ private equity holdings are valued at more than $21 billion, which counts for a 14.5 percent allocation to the asset class. The retirement system’s target allocation is 12 percent.

As of the 30 September, the private equity portfolio has generated a 13.42 percent return since its inception, according to CalSTRS’ website.