CalSTRS teachers’ pension fund announces investment loss

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The headquarters of the California State Teachers’ Retirement System, or CalSTRS, on Waterfront Place in West Sacramento is seen on the right in a drone photo on December 5, 2020.

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California’s state teachers’ retirement system lost 1.3% on its investments in the past fiscal year, according to preliminary results posted online.

The loss – the system’s first negative return since 2009 – came as the value of stocks and bonds fell around the world.

The value of the teachers’ pension fund was $301.6 billion as of June 30, according to a news release. The fund is used to pay pension benefits for approximately 980,000 members and beneficiaries.

The system remains underfunded. As of June 30, 2021, CalSTRS had 73% of the assets it needed to cover its long-term obligations, according to the release. This figure was the result of a record return on investment in the previous fiscal year, which led to estimates that the system could return to 100% funding five years earlier than expected, in 2041 rather than 2046.

CalSTRS will not announce its new funding status until next spring, but is on track to achieve full funding by 2046, according to the release.

The system aims for a 7% investment gain each year to stay on track. Its annual performance over the past few years has averaged 9.4% per year over the past 10 years and 7.8% over the past 20, according to the statement.

“As long-term investors, we think in terms of decades. One-year returns are akin to the pace of running a mile during a marathon,” Chief Investment Officer Christopher Ailman said in the release. “In a very difficult and unusual market environment where stocks and bonds fell double digits, our diversified portfolio mitigated the losses.”

CalSTRS is the second largest public retirement system in the nation, after the California Public Employees Retirement System. CalPERS reported a 6.1% loss on its investments last year, leaving it worth $440 billion and a funded status of around 72%.

California’s two major pension funds performed better than the average US fund last year, according to estimates by the Equable Institute, a New York-based nonprofit. The pension-focused organization estimated that the average fund lost 10% last year.

CalSTRS lost 16.6% on stocks and 10.3% on fixed income investments such as bonds, but posted gains of 26.2% on real estate, 23.7% on private equity and additional positive returns in other asset classes, depending on the results.

This story was originally published August 2, 2022 12:38 p.m.

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Wes Venteicher presents The Bee’s popular coverage of State Worker in the newspaper’s Capitol Bureau. It covers taxes, pensions, unions, state expenses, and the California government. A native of Montana, he reported on health care and politics in Chicago and Pittsburgh before joining The Bee in 2018.

Dolores W. Simon