California teachers pension fund reports 19 pct investment return

July 14 Mon Jul 14, 2014 6:00pm EDT

July 14 (Reuters) - The California State Teachers' Retirement System pension fund closed its 2013-2014 fiscal year with a 18.66 percent return on investments, for a second consecutive year of healthy investment returns.

CalSTRS, the second-largest U.S. pension fund, credited a growing equity market, coupled with a bias to U.S. companies. The earnings came in well above the actuarial assumed rate of 7.5 percent and over the 2012-2013 fiscal year portfolio return of 13.8 percent.

"These numbers are extraordinary and very encouraging," said Sharon Hendricks, Calstrs investment committee chair, in a prepared statement on Monday. "This second year of outstanding portfolio performance positions us well as we move into the future with a diverse asset allocation in place."

CalSTRS calculated that its $189.1 billion portfolio enjoyed a 11.2 percent return over the past three years, a 13.7 percent return over five years, a 7.7 return over 10 years, and an 8.4 percent return over 20 years.

The positive years, such as the last two, outweighed years when the market sank, such as in fiscal year 2008-2009, when CalSTRS investments dropped by 25 percent. Negative years drove much of the funding shortfall following the dot-com bust in the early 2000s, reported CalSTRS, which faces a nearly $74 billion funding gap.

In June, Governor Jerry Brown signed Assembly Bill 1469, which phases in higher pension contributions rates over the next several years, including an increase to 8.15 percent from 8 percent of payroll for all CalSTRS members this year.

"It's that volatility and the potential for more of it in the future that makes a responsible funding plan so instrumental to the long-term viability of this pension fund," said CalSTRS Chief Executive Jack Ehnes. "The new funding plan, a result of the passage of AB 1469, and a truly stellar investment staff, means CalSTRS has the resources to invest prudently and continue to weather future financial storms."

The world's largest educator-only pension fund, Calstrs serves 868,000 public school educators and their families in California. (Reporting By Robin Respaut)