July 18, 2008 / 5:38 PM / 10 years ago

Calpers posts 2.4 percent loss

SAN FRANCISCO (Reuters) - Calpers, the biggest U.S. pension fund, posted a 2.4 percent loss in its June-ended fiscal year, fueled by a 10.7 percent decline in the value of its stock holdings, its top investment officer said on Friday.

Separately, sister pension fund Calstrs reported a 3.7 percent loss in the June-ended year, marking its first loss in six years, also rooted in its stock holdings.

Calpers’ 2.4 percent loss marked the worst performance for the fund, the California Public Employees’ Retirement System, since its 2002 fiscal year, when it lost 5.9 percent, and reduced the value of its total assets to $239.2 billion at the end of June, said fund spokeswoman Pat Macht.

As of July 16, Calpers’ assets were valued at $230.2 billion.

“It was difficult for any investor to make positive returns in stocks this past year, but we realized gains in other areas, ending the year in good financial shape,” said Anne Stausboll, the pension fund’s interim chief investment officer.

“Private equity returns led the way in gains. Fixed income and our new inflation-linked asset class were also in positive territory,” she added.

The fund’s inflation-linked asset class includes commodities and infrastructure, investment areas new to Calpers. Russell Read, who recently left as chief investment officer of Calpers to start a green-focused investment firm, had pressed the fund to move into those areas.

Stausboll noted other moves last year that helped limit losses: “Last fall, we underweighted public stocks, and it played a role in moderating the negative impact of equity returns on our fund.”

“We are well positioned for the eventual recovery of public markets,” she added. “We’re moving more money into international sectors and revising our external manager program to enhance returns.”

While the value of Calpers’ stock portfolio fell nearly 11 percent, its private equity holdings gained 19.6 percent for the 12 months through March 31 and its inflation-linked assets returned 22.9 percent over nine months.

Global fixed-income assets returned 7.7 percent for the year and real estate gained 8.1 percent for the 12 months through March 31.

Calpers in its statement said it was 93 percent funded at the end of June and its 2.4 percent loss will not significantly affect its ability to pay benefits to members.

Additionally, the loss will not require public agencies to provide additional funds to Calpers. “Because we had squirreled away some of the money we had made in the past four years and can apply those gains against the loss, employers will not be asked by Calpers to make up this loss by giving us more money,” Macht said.

Calstrs, the $162.2 billion California State Teachers’ Retirement System, in a statement said its non-stock assets helped to minimize its loss.

The value of the fund’s non-U.S. equities fell 5.8 percent while the value of its U.S. Equities dropped 13.4 percent.

The fund’s private equity assets gained 11.6 percent, its real estate holdings picked up 11.8 percent and its fixed-income returns posted growth of 6.1 percent.

“I look at single-year returns as a one-mile measurement within a marathon. It’s a long race and we’ve just had a slow mile. Over the last three and five years we exceeded our goal,” said Calstrs Chief Investment Officer Christopher Ailman.

Reporting by Jim Christie; Editing by Gary Hill

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