Public Equities Buoy CalSTRS’ 6.3% Investment Return for Fiscal 2023

The California State Teachers’ Retirement System reported a 6.3% net return on investments for the fiscal year ending June 30, raising its total asset value to $315.6 billion. The performance matched that of the pension giant’s benchmark but fell short of its 7% assumed rate of return.

“During an unusual and challenging year where the Federal Reserve constantly raised interest rates, our team deftly managed our portfolio to navigate risks such as tightening credit markets and lending standards, lower levels of liquidity and a potential recession,” CalSTRS CIO Christopher Ailman said in a release.

Public equities were by far the top performing asset class for the portfolio, returning 16.7% for the year and beating their benchmark’s return of 16.3%. However, the fund’s innovative strategies allocation was the top performer for the pension fund, returning 9.3%, compared with its benchmark’s return of 3.4%.

Inflation sensitive investments returned 1.5% for the year, nearly doubling the 0.8% return earned by their benchmark, while fixed-income investments returned 0.1%, compared with their benchmark’s loss of 0.5% for the year.

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Risk-mitigating strategies were the worst-performing investment for the portfolio, losing 4.3% for the year, while their benchmark only lost 1.8% during the same period. The pension fund’s private equity investments lost 0.9% for the year, while their benchmark broke even, and its real estate investments were down 0.5% but easily outperformed their benchmark, which lost 3.9% for the year.

As of the end of June, the asset allocation for CalSTRS’ investment portfolio was 40.4% in public equities, 16.1% in real estate, 10.1% in fixed income, 8.8% in risk-mitigating strategies, 15.5% in private equity, 6.1% in inflation sensitive, 1.6% in strategic overlay and cash and 1.4% in innovative strategies.

CalSTRS also reported three-, five- and 10-year returns of 10.1%, 8.2% and 8.7%, respectively. Over the longer term, the pension fund has 20- and 30-year returns of 8.0% and 7.8%, respectively.

“Our highly diversified portfolio has helped weather the past few years of uncertainty,” CEO Cassandra Lichnock said in the release, “and our multiyear returns, including this improvement from the previous fiscal year, demonstrate that we remain on track to achieve full funding.”

CalSTRS’ funded status was 74.4% as of June 30, with the pension fund reporting it is on track to be fully funded by 2046.