Matt Toldedo of Chief Investment Officer reports CalSTRS achieves 8.4% return in 2024 fiscal year:
The California State Teachers’ Retirement
System achieved an 8.4% return in its fiscal year 2024, a period ending
June 30, the fund announced on Tuesday.
Like most other funds this year, that return was boosted by strong
public equities returns, for CalSTRS, that asset class returned 19%.
“A
year of strong performance in the global public markets underscores the
importance of our highly diversified portfolio,” CalSTRS CIO Scott Chan
said in a statement. “As long-term investors, we prioritize sustained
returns over decades. Our track record of consistent returns, above our
7.0% investment assumption, demonstrates our effective approach to
investing.”
The
fund also saw strong returns from its collaborative strategies, a set
of investments across the public and private markets in unique and
innovative opportunities, these investments typically have increased
control from CalSTRS and lower fees. This asset class returned 14.4% in
the fiscal year, reported on a one quarter lag.
The
fund’s private equity portfolio returned 8.6%, inflation sensitive
assets returned 3.2%, and risk-mitigating strategies returned 2.6%. The
only negative returning asset class, real estate, returned negative 9.8%.
Over the past five, 10, 20 and 30 years,
the fund has returned an annualized 8.5%, 7.7%, 7.6%, and 8.1%
respectively. The fund aims to surpass an actuarial return assumption of
7%, the fund’s benchmark, and the return needed to meet the fund’s
pension obligations.
The
fund reported an asset allocation of $41.4% to U.S. equities, 15.5% to
private equity, 13.9% to real estate, 11.2$ to fixed income, 8.4% to
risk mitigating strategies, 6.3% to inflation sensitive assets, 1.7% to
strategic overlay assets and cash, and 1.6% to collaborative strategies.
CalSTRS manages pensions for more than one million beneficiaries, current and retired teachers of California.
Arleen Jacobius of Pensions & investments also reports CalSTRS beats its benchmark with 8.4% fiscal-year return, propelled by stocks:
CalSTRS earned an
8.4% net return for fiscal year 2024, beating its 7.4% benchmark, the
$337.9 billion, West Sacramento-based pension fund reported.
The California State Teachers' Retirement System's
most recent fiscal year return also exceeded the prior year's gains of
6.3% and the pension fund's 7% assumed rate of return.
CalSTRS
funded status was 75.9% as of June 30, 2023, the sixth consecutive year
its funded status has increased. The pension fund’s actuarial valuation
including its funded status through June 30 will be released in May
2025.
CalSTRS earned 8.5% for the five-year period, 7.7% for the
10-year, 7.6% for the 20-year and 8.1% for the 30-year period ended June
30. CalSTRS outperformed its benchmark in all time periods: 7.7% for
the five-years, 7.3% for the 10-years, 7.5% for the 20-years and 7.8%
for the 30-years ended June 30.
The best performing asset class
for the fiscal year was public equity at 19%, outperforming its 18.6%
benchmark, followed by collaborative strategies with 14.4%, above its
8.8% benchmark.
Private equity's internal rate of return lagged a
quarter and totaled 8.6%, besting its 6.6% benchmark; inflation
sensitive was 6.4%, outperforming its 5.2% benchmark; fixed income was
at 3.2% vs 3% benchmark; risk mitigating strategies was at 2.6% vs.
CalSTRS' 1.8% benchmark and real estate lost -9.8% vs. a loss of -12%
for its benchmark.
As of June 30, CalSTRS had 41.4% in U.S. and
non-U.S. stocks, 15.5% in private equity; 13.9% in real estate; 11.2% in
fixed income; 8.4% in risk mitigating strategies; 6.3% in inflation
sensitive; 1.7% in strategic overlay and cash, and 1.6% in collaborative
strategies.
And Rya Jetha of Bloomberg reports CalSTRS posts 8.4% gain for fiscal 2024, underperforms CalPERS:
The California State Teachers’ Retirement System,
the second-largest US public pension fund, returned 8.4% for its latest
fiscal year — exceeding its target but lagging behind the country’s
largest pension.
The returns pushed Calstrs’
total assets to $341.4 billion for the fiscal year ended June 30, the
pension said in a statement Tuesday. Calstrs said it’s ahead of schedule
in reaching full funding by 2046, with 75.9% of its future obligations
covered, and that it outpaced its 7% target.
“While
the 8.4% return over the past year is commendable, our true commitment
lies in fostering consistent, long-term growth for our members’
pensions,” Chief Investment Officer Scott Chan said in the statement.
Earlier
this month, the California Public Employees’ Retirement System reported
a 9.3% gain for its latest fiscal year, pushing that pension’s assets
to $502.9 billion.
Public equity investments
showed the strongest returns for Calstrs at 19%, followed by
collaborative strategies at 14.4% and private equity at 8.6%. Real
estate fell 9.8% but still exceeded its benchmark, according to Calstrs.
CalSTRS issued a press release going over the results for fiscal 2024:
WEST SACRAMENTO, Calif. (July 30, 2024) — The California State
Teachers’ Retirement System (CalSTRS) today announced an 8.4% net return
on investments for the 2023–24 fiscal year, ending with the total fund
value at $341.4 billion as of June 30, 2024.
CalSTRS is a
long-term investor with a goal of achieving an average return of 7.0% to
meet pension obligations. The 2023–24 return keeps CalSTRS on track, as
the 5-, 10-, 20- and 30-year returns all surpass the actuarial
assumption of 7.0% during a period of inflation, rising interest rates
and geopolitical uncertainty.
CalSTRS’ public assets are valued
through June 30, 2024, while private assets are cashflow adjusted and
valued through March 31, 2024. The valuations and benchmark returns of
the private assets, primarily held within the Real Estate, Private
Equity and Inflation Sensitive portfolios accounting for over 35% of the
CalSTRS Investment Portfolio, lagged three months, per industry
standards.
“This is another important step in protecting the more
than 1 million California public educators and beneficiaries who rely on
us to help secure their future,” Chief Executive Officer Cassandra
Lichnock said. “Our strong returns this year reflect our steady progress
toward achieving full funding to keep the promises made to our
members.”
CalSTRS is ahead of schedule in reaching full funding
by 2046. The CalSTRS funded status was 75.9% as of June 30, 2023, the
sixth consecutive year the funded status has increased. It has grown
more than 13% (from 62.6% to 75.9%) since 2017. Funded status refers to
the ratio of CalSTRS assets to its total liabilities.
The next
actuarial valuation of the Defined Benefit Program, which will include
an updated funded status, will be released in May 2025.
“A
year of strong performance in the global public markets underscores the
importance of our highly diversified portfolio,” Chief Investment
Officer Scott Chan said. “As long-term investors, we prioritize
sustained returns over decades. Our track record of consistent returns,
above our 7.0% investment assumption, demonstrates our effective
approach to investing.
“While the 8.4% return over the past year
is commendable, our true commitment lies in fostering consistent,
long-term growth for our members’ pensions.”
Public Equity
investments showed the strongest returns, at 19%. Also strong was
Collaborative Strategies, with a portfolio return of 14.4%.
Private
Equity (8.6%), Inflation Sensitive (6.4%), Fixed Income (3.2%) and Risk
Mitigating Strategies (2.6%) also delivered positive returns. Real
Estate reported a negative return (–9.8%), yet still exceeded its
benchmark.
CalSTRS also exceeded its total fund benchmark in
2023–24 by 1.0%. Benchmarks are set by the Teachers’ Retirement Board,
which governs CalSTRS. Asset classes and the CalSTRS Investment
Portfolio are measured against the benchmarks. Comparing the CalSTRS
performance to its respective benchmarks identifies the contribution or
loss caused by manager performance and strategic asset allocation
decisions.
As
of June 30, 2024, the CalSTRS Investment Portfolio holdings were 41.4%
in U.S. and non-U.S. stocks (Public Equity); 15.5% in Private Equity;
13.9% in Real Estate; 11.2% in Fixed Income; 8.4% in Risk Mitigating
Strategies; 6.3% in Inflation Sensitive; 1.7% in Strategic Overlay and
Cash, and 1.6% in Collaborative Strategies.
About CalSTRS
CalSTRS
provides a secure retirement to more than 1 million members and
beneficiaries whose CalSTRS-covered service is not eligible for Social
Security participation. On average, members who retired in 2022–23 had
25 years of service and a monthly benefit of $5,141. Established in
1913, CalSTRS is the largest educator-only pension fund in the world
with $341.4 billion in assets under management as of June 30, 2024.
CalSTRS demonstrates its strong commitment to long-term corporate
sustainability principles in its annual Sustainability Report.
Alright, I covered CalPERS' fiscal 2024 results here and think it's only appropriate to also cover CalSTRS as they are two giant US pension funds people track closely.
It's the same story, global public equities which represent 41% of the overall portfolio delivered 19% return in fiscal 2024 and private equity which represents 16% of the portfolio delivered a decent return of 8.6% in fiscal 2024.
Collaborative Strategies, with a portfolio return of 14.4%, was also a strong performer beating its benchmark of 8.8% but these strategies only represent 1.6% of the total portfolio (they co-invest to lower fees). This is where Scott Chan, CalSTRS' new CIO, will focus his attention going forward.
On the flip side, offices continued to weigh on real estate returns, down 9.8% last fiscal year but outperforming its benchmark.
While the results were solid, overall CalSTRS, just like CalPERS, remains underfunded with 75.9% of the assets to cover future liabilities.
It's not a disaster but if we get another global financial crisis where rates decline precipitously and assets get clobbered, that funded ratio will deteriorate which is why Scott Chan and his investment team want to mitigate downside risk as much as possible.
In other related news, CalSTRS recently announced the appointment of June Kim as senior investment director of total fund management:
Kim has been promoted within CalSTRS to this position.
Formerly
the director of Global Equity, Kim now serves as the senior leader over
the Total Fund Management Division. This is a new position.
Kim will report to Chief Investment Officer Scott Chan.
"I'm
excited to work with June in her new senior leadership role," Chan
said. "June has nearly three decades of combined investment experience
in the public and private sectors and has proved herself to be an
excellent leader in her time at CalSTRS. I am confident that her
expertise and commitment to our mission will continue to strengthen the
financial future of California's public educators."
Senior
investment directors make decisions that significantly affect the
Teachers' Retirement Fund, advise the chief investment officer on
sophisticated portfolio management strategies and decisions, and make
tactical and strategic investment recommendations.
In her new position, Kim's responsibilities will include:
Overseeing portfolio construction, asset allocation, balance sheet management and investment risk across the total fund.
Assisting with strategic goals and objectives, asset allocation, business plans and budgetary planning.
Developing and overseeing cross-asset investment strategies and initiatives.
Assisting in the coordination of Investments Branch reports and plans with the CalSTRS strategic plan and risk management plan.
Serving as the lead for the CalSTRS Asset Allocation study.
For 10 years, as the director of Global Equity, Kim was responsible for managing the CalSTRS Global Equity Portfolio.
Her duties included:
Providing investment expertise to senior management and the Investment Committee.
Formulating and recommending investment policies and strategies.
Leading staff in the research, analysis and portfolio management of the Global Equity Portfolio.
During
Kim's tenure as the director of Global Equity, the team expanded its
internal management capabilities to non-U.S. developed and emerging
markets and significantly increased the amount of assets managed
internally, resulting in meaningful cost savings. She will continue to
work with the Global Equity team until a new director of Global Equity
is hired.
Kim chairs the diversity steering committee for the
Investments Branch, which oversees the diversity, equity and
inclusion (DEI) efforts in the branch and with investment industry
partners. As part of her role, Kim led the planning team for the CalSTRS
"Beyond Talk" event for five years, collaborating with key investment
managers on a workshop that shares research and practical steps leaders
can take to benefit from increasing the diversity of their teams.
"I
am grateful to have had the opportunity to lead the terrific Global
Equity team and am confident they will continue to thrive," Kim said. "I
look forward to this new opportunity working with the CIO to build out
the CalSTRS Total Fund Management Division to enhance value to the total
fund. I also remain committed to continuing my work to increase
diversity in the institutional investment community as I firmly believe
it will help improve the industry."
Prior to joining CalSTRS, June
worked for seven and a half years at the Los Angeles County Employees
Retirement Association. She also worked in the private sector for 11
years in asset management and institutional foreign exchange.
In
addition to her more than 28 years of experience in the investment
industry, Kim has a bachelor's degree in business economics from the
University of California, Los Angeles. She is a 2019 Finance Leaders
Fellow of the Aspen Institute and a member of the Aspen Global
Leadership Network.
That is a solid appointment, a well-deserved promotion for June Kim, and she will be instrumental in helping Scott Chan with his duties.
What else? Back in February, highlights long-standing commitment to sustainability, resiliency in its 2022–23 Sustainability Report, an annual snapshot of organizational sustainability. You can read details here.
Lastly, Congratulations to CalSTRS' CEO Cassandra Lichnock, who has been named to the Forbes 50 over 50 list for Investment. Read the article here.
Below, I embedded CalSTRS' Investment Committee board meeting that took place two months ago on May 1st.
And Jeffrey Gundlach, DoubleLine Capital CEO, joined 'Closing Bell' on Thursday to discuss the Fed rate decision and Chair Powell's dovish comments.
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