Hit by “extraordinary volatility” the $226.5 billion California Public Employees’ Retirement System is reporting a lowly 1.1% investment return for 2011 — far short of its 7.75% rate of return assumption. Chief investment officer, Joseph Dear said that the portfolio gained 20% in the first half of the year but volatility rapidly erased the gains in the last half of 2011. The pension giant’s returns might be far less than other public plans because of its heavy allocation to emerging and developed markets equities. However, CalPERS’ real estate portfolio also underperformed its benchmark by a wide margin, with a 9.92% return compared to its custom benchmark of 14.22%. Private equity was a bright spot for the fund, however.
CalPERS 2011 returns at a glance:
Public equities returned -12.3% compared to a -12.21% custom benchmark;
Fixed income returned 12.38%, compared to a custom benchmark of 13.91%.
Absolute-return strategies returned -2.29%, compared to a custom benchmark return of 5.6%.
Private equity returned 12.37%, compared to the custom benchmark’s 1.38%.