Tip:
Highlight text to annotate it
X
Hello, and welcome to inside CalSTRS investments. A series of short conversations to help you understand a little more,
About how contributions are invested for the benefit of California’s educators.
I’m here this morning with Chris Ailman, the Chief Investment Officer at CalSTRS,
So, the year-end returns are in, how did CalSTRS do?
You know, this year has been a great year.
The portfolio performed at 13.55 percent net of our investment management costs,
Outperforming our underlying benchmark by almost half a percent.
That’s almost double the assumed return of about 7.5 percent, which we’re expected to earn, isn't that correct?
It is, and it was really a remarkable year. Considering how weak the U.S. economy was,
that only grew about two percent during the year, we had the fiscal cliff,
So we’re really pleased to be able to earn 13 and a half percent.
And over a three-year period the portfolio has earned 12.3 percent net of our fees.
So we’re very happy with that number. That's going to help the funding a bit,
And it is also over the seven and a half percent actuarial assumed rate.
Even so, the entire system is still considered underfunded. Can you explain that a little bit?
What people need to realize is that we cannot invest our way out of this.
There are two flows into a retirement system; investment earnings and contributions.
So we’re going to do our darndest to generate as good of an investment return as we can,
But we also need the contribution side. So we think this will probably help slow the decline in the funding rate,
But the funding rate will continue to drop.
Moving back to what you were talking about, the long term picture since we’re long term investors,
so how have we done over: three, five, maybe ten years?
Well, good point. A retirement system is very long term investor, and if you look at what we've done,
we've earned, seven and a half percent over ten years, and seven and a half percent per year, over twenty years.
And you have to realize in that ten year number, you’re picking up the great recession of 2008.
So I think it really shows the resiliency in the portfolio, and seven and a half over a long time period is about the right number for us to shoot for.
Chris, it looks like our global stocks really lead in terms of the portfolio’s performance last year,
Can you talk about that as well as the other asset categories?
I’m glad you asked that, you know most people think that when you look back at 2012-2013,
We had the fiscal cliff at year end; so it was a very difficult time for the U.S and the global economy.
But what will surprise people is, the stock portfolio rose a full 19 percent.
Not just here in the U.S. but across the globe. And we out performed our benchmark.
The next best asset class was actually real estate. Slowly coming back from the rights down that we and others absorbed in 2008.
But it is a great sign to see the real estate portfolio post a positive 14 percent return.
Chris, congratulations to you and your entire investments staff for a terrific year.
Thanks Mike, it was a great year. We’re really happy and pleased with the performance.
And it’s not just for the investment staff, but all of CalSTRS and for the members. That’s who we work for.
You’ve been watching inside CalSTRS investments. For Chris Ailman, I’m Mike Sicilia, Thanks for watching.