California's two largest public pension funds have reported returns of over 20% for the fiscal year 2010-2011

The biggest of the two, the California Public Employees' Retirement System (CalPERS), reported a 20.7% return on investments for the one-year period that ended 30 June.

Following on from its best annual performance in 14 years, Rob Feckner, the board president at CalPERS, said: "For the second straight fiscal year, the pension fund exceeded its long-term annualized earnings target of 7.75%."

CalPERS said its net-of-fees performance was the strongest since the 20.1% return of 1997 and the highest since the recent recession.

"This is a great one-year achievement that powerfully affirms our strategy and the skills of our investment team," said chief investment officer Joseph Dear. "While we can't assume that we'll sustain this high level of earnings, we have averaged a net return on investments of 8.4% for 20 years."

The market value of CalPERS's assets on 30 June stood at approximately $237.5bn, $37bn more than last year.

Over the same period the California State Teachers' Retirement System (CalSTRS) has reported its highest returns in 25 years with no less than a 23.1% return on investments. The actuarial assumed rate was also 7.75%.

This marks the second consecutive year of excellent performance results for the scheme, which has an estimated market value be $154bn. Last year it returned 12.2%. However, due to losses of 25% during the crisis, the scheme is not yet in the clear.

"These losses", says the scheme in a statement, "remain a lingering drag because the actuarial impact of CalSTRS investment portfolio performance is based on a three-year rolling average. That puts the three-year return, at 0.98%, well below the actuarial 7.75% rate".

It said that when the next actuarial valuation is presented in 2012, the CalSTRS funding level will therefore drop below today's 71%, but the most recent return will "help slow the decline".

The scheme has limited options when it comes to addressing its funding deficit since it cannot unilaterally raise contribution rates.

Jack Ehnes, chief executive officer at CalSTRS, said: "Without legislative approval for increased contributions, even given this past year's impressive performance, CalSTRS would need a more than 20% investment return each year for the next four years to achieve full funding in 30 years, an impractical expectation."

azeevalkink@wilmington.co.uk 

First published 19.07.2011