The portfolio of the U.S.’ largest pension fund returned 0.6% in fiscal year 15-16, marking CalPERS’ worst return since 2009 and the second consecutive year of underperformance relative to its 7.5 percent discount rate.
Speaking at a CalPERS meeting, Chief Investment Officer Ted Eliopoulos said performance for the year was driven primarily by global equity markets, which represent a little over half of the fund’s portfolio. Equities delivered a return of negative 3.4 percent.
“When 52 percent of your portfolio is achieving a negative 3.4 percent return, that certainly sets the main driver for the overall performance of the fund,” said Eliopoulos, who had projected flat returns for the year in June.
Inflation assets returned a negative 3.6 percent return, helping drag down the fund’s overall performance, Eliopoulos said.
Fixed income and real estate investments were bright spots in the portfolio, posting 9.3 percent and 7.1 percent returns respectively.
In response to the drop from previous years, Eliopoulos said CalPERS would reduce risk from its portfolio and have simpler investments that do not require paying fees to money managers.