CalSTRS reports 13.4% net investment return for fiscal year 2016–2017

The $208.7 billion California State Teachers’ Retirement System has posted a 13.4 percent net of fees return for the 2016–2017 fiscal year, with growth being driven by strong performance across all markets, led by non-U.S. equity.

This year’s performance marks a successful year for CalSTRS following two fiscal years with single-digit returns. However, in keeping with CalSTRS’ long-term focus, CIO Christopher Ailman cautioned against making too much of a single year’s high performance.

“Just as one bad year will not break us, one good year won’t make us. We intentionally keep our eyes focused on a 30-year horizon and make our adjustments with that timeframe in mind, rather than reactively responding to any given situation at-hand,” said Ailman. “Investment performance over time is the true hallmark and measure of success in a pension fund like CalSTRS, as we aim to achieve long-term value creation to secure the retirement futures for more than 914,000 California educators.”

The current year’s performance will be a positive contributor to CalSTRS’ 7.0 percent 30-year investment return assumption, adopted by the Teachers’ Retirement Board in February 2017 as part of the two-year phased-in approach outlined in the actuarial experience study.

“While this year’s performance is obviously great news, we need to keep in mind that returns are just one piece of the overall funding picture for CalSTRS,” said CEO Jack Ehnes. “The long-term funding plan, set into motion by the governor and legislature in July 2014 via AB 1469, established a predictable schedule of contribution rate increases shared between members, the state and employers over a 32-year span to bring CalSTRS toward full funding by 2046. The funding plan is a model of shared responsibility, and it works in tandem with the positive return performance that the investment portfolio generates, to advance CalSTRS along the path of long-term sustainability.”

As of June 30, 2017, the CalSTRS investment portfolio holdings were 56.4 percent in U.S. and non-U.S. stocks, or global equity; 8.1 percent in private equity; 12.6 percent in real estate; 1.3 percent in inflation sensitive; 5.1 percent in risk mitigating strategies; 0.3 percent in innovative strategies and strategic overlay; 14.7 percent in fixed income; and 1.5 percent in cash.