CalPERS Reports Preliminary 9.3% Investment Return
Posted 8 hours ago ago by Mark DeVaughn
CalPERS today reported a preliminary net return of 9.3% on its investments for the 12-month period ending June 30, 2024. Assets as of that date were valued at $502.9 billion.
The investment return outpaced the discount rate of 6.8%, comparable to an assumed rate of return and a policy marker established by the CalPERS Board of Administration. It was also a notable improvement from the two most recent fiscal years, where investment returns were influenced by a variety of economic and geopolitical challenges.
When using the preliminary net return of 9.3% to assess long-term obligations, the overall estimated funded status of the Public Employees’ Retirement Fund (PERF) stands at 75%.
“Our investing strategy was well positioned to take advantage of improving economic conditions over the past 12 months,” said CalPERS Chief Executive Officer Marcie Frost. “Meeting or exceeding our long-term investing goals is crucial for providing the retirement benefits that our 2 million members and their families are counting on.”
Public equity investments, comprising 41.9% of the PERF, led the way among asset classes with an estimated 17.5% return.
The private debt asset class, established in 2022, also performed strongly. Its estimated return was 17%.
Fixed income and private equity reported returns of 3.7% and 10.9%, respectively. Real assets reported a negative return for the 2023-24 fiscal year.
Last year, CalPERS reported a preliminary net return of 5.8% on its investments for fiscal year 2022-23.
The previous year, the agency announced a preliminary -6.1% net return for the 12-month period ending on June 30, 2022.
“Our team remains focused on executing on our long-term investment strategy, building a diversified portfolio to navigate markets and mitigate volatility over our multi-generational investment horizon,” Interim Chief Investment Officer Dan Bienvenue said.
Updated long-term return rates reflect the addition of recent lower investment returns in the calculation. Preliminary total fund annualized returns for the five- year period ending June 30, 2024, stood at 6.6%; the 10-year period at 6.2%; and the 20-year period at 6.7%.
The 30-year return rate rose slightly to 7.7%.
Preliminary net returns are an early snapshot of the CalPERS portfolio. CalPERS investment and finance staff and outside experts will review the portfolio’s performance in the next few months to determine the final fiscal year returns for 2023-24.
The ending value of the PERF for FY 2023-24 will be based on additional factors beyond investment returns, including employer and employee contributions, monthly payments to retirees, and various investment fees.
Once finalized, fiscal year performance returns are used to set contribution levels for the State of California and school districts in the 2025-26 fiscal year and for contracting counties, cities, and special districts in the 2026-27 fiscal year.
Under the current provisions of the CalPERS Asset Liability Management process, investment returns that exceed the established 6.8% discount rate require the Board of Administration to review whether to lower the rate for future years. This process is included in the CalPERS Funding Risk Mitigation Policy.
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