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CalPERS posts mixed real assets performance

The $307bn Californian pension underperformed its one-year benchmark by 5.1% in 2015-2106 and generated a small loss over the decade.

The California Public Employees’ Retirement System took a hit on its real assets portfolio in fiscal year 2015-2016 that impacted its short-term and long-term returns for the $21.7bn programme.

The pension, which managed $307.46 billion in assets as of 17 January this year, posted a one-year return of 6 percent over the period, 5.1 percent below its benchmark. It fared better over three years, coming just 0.9 percent below its target, and beat its 11 percent benchmark over five years by 0.1 percent.

The biggest miss, however, was over 10 years, where CalPERS registered a return of -0.1 percent. Its benchmark for the period was 7.8 percent.

The institution explained its disappointing short-term performance by citing circumstantial factors. “This underperformance was driven by realised losses on legacy assets in the opportunistic programme,” Doug Hoffner, interim chief executive, wrote in the pension’s latest annual financial report.

Contacted by Infrastructure Investor, CalPERS cited the same factors as the chief reason behind the dip in returns.

The results mark a sharp drop on fiscal year 2014-2015, when its one-year, three-year and five-year return indicators respectively stood at 12.4 percent, 12.3 percent and 11.8 percent. Its 10-year performance was already disappointing then, though positive at 2.2 percent.

The pension did not disclose how much of its real assets portfolio infrastructure represented at 30 June 2016, but its benchmark for the strategy includes a 15 percent infrastructure component, the rest being accounted for by real estate.

In 2014-2015, CalPERS’s infrastructure assets were valued at about $2.2 billion. Overall, the pension has a 2 percent allocation to infrastructure and forestland.