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California teachers pension fund reports first investment loss since Great Recession

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August 2, 2022, 2:38 PM

Xavier Mascareñas/xmascarenas@sacbee.com

The California State Teachers’ Retirement System lost 1.3% on its investments in the last fiscal year, according to preliminary results posted online.

The loss — the system’s first negative return since 2009 — came as the value of stocks and bonds tumbled around the world.

The value of the teachers’ pension fund stood at $301.6 billion as of June 30, according to a news release. The fund is used to pay retirement benefits for about 980,000 members and beneficiaries.

The system remains underfunded. As of June 30, 2021, CalSTRS had 73% of the assets it needed to cover its long-term obligations, according to the release. That figure resulted from a record-high investment return in the prior fiscal year, leading to an estimate that the system might return to 100% funding five years ahead of its schedule, in 2041 rather than 2046.

CalSTRS won’t announce its new funded status until next spring, but is on track to reach full funding by 2046, according to the release.

The system aims for a 7% investment gain each year to stay on track. Its annual performance in recent years averages out to 9.4% per year over the last 10 years and 7.8% over the last 20, according to the release.

“As long-term investors, we think in terms of decades. One-year returns are akin to the pace of running a mile during a marathon,” Chief Investment Officer Christopher Ailman said in the release. “In a very challenging and unusual market environment where both equities and bonds were down double digits, our diversified portfolio mitigated losses.”

CalSTRS is the nation’s second-largest public pension system, after the California Public Employees’ Retirement System. CalPERS reported a 6.1% loss on its investments for last year, leaving it with a value of $440 billion and a funded status of about 72%.

Both major California pension funds performed better than the average U.S. fund last year, according to estimates from New York-based nonprofit the Equable Institute. The pension-focused organization has estimated the average fund lost 10% last year.

CalSTRS lost 16.6% on stocks and 10.3% on fixed income investments such as bonds, but reported gains of 26.2% on real estate, 23.7% on private equity and additional positive returns in other asset classes, according to the results.