CalSTRS, CalPERS report strong real estate returns

Earlier this week, two of the largest US pensions announced their investment gains for the last fiscal year—including another year of strong returns from property.

The California State Teachers’ Retirement System and the California Public Employees’ Retirement System both reported their returns for the 2006 fiscal year this week—and real estate continued to post outsized returns.

CalPERS, the country’s largest public pension, said its real estate portfolio returned 20.2 percent for the 12 months ending March 31, 2007, according to the pension, topping its benchmark of 12.5 percent.

Core investments in the office, retail, multi-family and industrial sectors produced a 19.9 percent return, while non-core housing, land and urban investments in California posted a 20.2 percent return. Around 8.2 percent of the CalPERS portfolio is invested in property.

Overall, CalPERS earned a 19.1 percent return on investments for the fiscal year to total $247.7 billion, for the pension’s highest gain in more than a decade. The pension’s global equity portfolio returned 23.7 percent, international stock chalked up 7.3 percent and international fixed income investments were up 2.3 percent.  The pension’s alternatives program, including private equity and venture capital, posted a 23.3 percent return, while hedge funds earned a 16.9 percent return. 

Teacher pension CalSTRS also announced this week that that its real estate investments had a 32.9 percent return for the past fiscal year. At the same time, the biggest allocation shift occurred in the real estate portfolio, which rose from 7.4 percent of the total portfolio in June 2006 to 10 percent in June 2007.

The pension’s alternative assets portfolio returned 27.6 percent for the 2006 fiscal year, beating the overall portfolio’s 21 percent return, but failing to match last year’s 32 percent return for the pension’s private equity and hedge fund investments. International stocks returned 30.2 percent, US stocks returned 20.9 percent and fixed income investments returned 6.5 percent.

This is CalSTRS’ fourth straight year of double-digit returns; last year it achieved a 13.2 percent return on investments. The pension has $170.4 billion in assets under management.