CalSTRS Earns Record Annual Return of 27.2%

The California State Teachers’ Retirement System (CalSTRS) reported a record 27.2% net return on investments for fiscal year 2020–21, topping its benchmark’s return of 24.98%, and easily surpassing its 7% assumed rate of return. The strong performance raised the portfolio’s total value to $308.6 billion, marking a 100% increase over the past decade alone. They were the “highest in my tenure,” CIO Chris Ailman told this publication.

Over the long term, the fund reported 20- and 30-year annualized returns of 7.6% and 8.6%, respectively, with three-, five-, and 10-year annualized returns of 12.2%, 11.8%, and 9.7%, respectively.

“We’ve built our portfolio for long-term performance, but this year’s results were nothing short of spectacular,” Chief Investment Officer Christopher Ailman said in a statement. “These are record-breaking numbers—the highest returns we’ve seen since the late 1980s.” (In 1982, there was an accounting change that produced higher returns that were unrelated to the markets.)

The strong annual returns for 2021 were driven by the portfolio’s private equity and public equity asset classes, which returned 51.9% and 41.8%, respectively, and beat their benchmarks’ returns of 47.8% and 41.2%, respectively.

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Inflation-sensitive investments returned 18%, ahead of the benchmark’s 14% return, followed by innovative strategies, which earned 11.7% and more than doubled the benchmark’s 5.6% return. Real estate and risk mitigating strategies returned 7.4% and 6.3%, respectively, surpassing their benchmarks’ returns of 1.5% and 5.5%, respectively, while fixed income returned 1.2%, ahead of its benchmark’s return of 0.4%.

As of June 30, the asset allocation of CalSTRS’ investment portfolio was 49.7% in public equity, 12.3% in real estate, 12% in private equity, 10.4% in fixed income, 8.6% in risk mitigating strategies, 3.7% in inflation sensitive, 2.8% in strategic overlay and cash, and 0.5% in innovative strategies.

Pension funds with fiscal years that end March 31 or June 30 have reported outsized returns in large part because those results didn’t include the period when the global markets crashed and then rebounded in early 2020 in response to the outbreak of the COVID-19 pandemic.

For example, the California Public Employees’ Retirement System (CalPERS), which also ends its fiscal year June 30, reported a preliminary 21.3% net return on investments, and Japan’s Government Pension Investment Fund (GPIF), whose fiscal year ends March 31, reported a record 25% return.

Meanwhile, the Massachusetts Pension Reserves Investment Trust (PRIT) and the Pennsylvania State Employees’ Retirement System (Penn SERS), had calendar year Dec. 31 returns of 12.6% and 11.1%, respectively. They were hit by the market crash, but were still able to earn double-digit gains thanks to a strong rebound. However, the Texas Association of Public Employee Retirement Systems, which reports for the year ended Sept. 30, filed before the rebound and reported an average return of 4.6%.