The State Worker

Another California pension fund falls just short of its investment return target

CalSTRS just missed its target rate for annual investment returns, recording 6.8 percent for the fiscal year ending June 30, according to a Tuesday news release.

The rate fell short of the $237 billion fund’s annual target of 7 percent, according to the release.

“It was a roller coaster year and a very challenging environment in which to generate returns,” said California State Teachers’ Retirement System Chief Investment Officer Christopher J. Ailman. “Thanks to the in-house expertise of our investment team, we were able to come very close to our assumed rate of return despite the instability of the market.”

The California Public Employees’ Retirement System, which has about $370 billion in assets, recently reported annual returns of 6.7 percent, missing its 7 percent goal.

Returns for both funds suffered amid a stock market slump in late 2018 and then climbed steadily through the first half of this year.

Low returns can cause the pension fund over to increase the amount of money they collect from their other two primary sources of income — payments from employers and from public employees.

But CalSTRS’ longer-term averages are higher. Its three-year average was 9.7 percent, its 5-year average was 6.9 percent and its 10-year return was 10.1 percent, according to CalSTRS figures.

A $5.1 billion cash infusion to the fund from the state budget this year will help limit costs for employers and the state, according to the release.

The fund is about 64 percent funded, according to the release, meaning it has 64 percent of what it would need to pay all current and future obligations to retirees.

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The fund has a plan to increase the funded status to 100 percent by 2046. Teachers’ contributions increased from 2014 through 2018, and they now contribute just over 10 percent of their pay toward their pensions. School districts contribute about 18 percent. Districts’ rate will increase to about 19 percent next year and then drop back down to 18.2 percent, according to CalSTRS projections.

Looking forward, Ailman cited President Donald Trump’s tweets along with trade wars, Iran aggression, consumer sentiment and Brexit as “key risks to monitor.”

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