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The solid net returns mark the second straight calendar year of double-digit gains for the nation’s largest public pension fund. Total fund assets closed 2010 at $225.7 billion. CalPERS assets have gained more than $65 billion since the fund’s low point in March 2009, at $160 billion.

“We repositioned our portfolio to take full advantage of the overall gains in the market last year,” said Joseph Dear, CalPERS Chief Investment Officer. “The strong returns we saw in 2010 prove that our comprehensive evaluation of all our investments is paying off for our members, employers and taxpayers.”

CalPERS private equity program – the Alternative Investment Management (AIM) Program – was the biggest gainer among asset classes in 2010, with a 21.5 percent overall return. That figure easily topped its benchmark by more than 7 percentage points. AIM returns lag the year-ending results by a quarter.

CalPERS Global Equity investments returned 14.6 percent last year, with domestic stocks gaining 17.3 percent and international stocks returning 12.8 percent. Both portfolios beat their benchmarks.

Other CalPERS asset classes also saw strong returns last year:

* Global Fixed Income, up 11.6 percent, beating its benchmark by nearly 3 percentage points.
* Inflation Linked Asset Class, which includes infrastructure, commodities, inflation-linked bonds and forestland, up 7.8 percent. That topped its benchmark by more than 2 percentage points.

Though the real estate portfolio saw an overall decline of 5 percent in 2010, the drop was the smallest since the beginning of the financial crisis. The reported returns also lag the year-end results by one quarter.

“During 2010, we reduced portfolio leverage and ended relationships with several real estate partners who didn’t meet our expectations,” Dear said. “Our current focus is on income-generating properties, and now that we’re beginning to see signs of a rebound in the market we’ll be ready to take advantage of opportunities as they arise.”

In December 2010, after nearly a year of review, the CalPERS Board of Administration approved a new asset allocation plan designed to position the fund for better risk-adjusted performance. The new model, which places investments in one of five groups, focuses on the risks to the portfolio and how different investments perform in different economic climates. This more “holistic” look at the portfolio will enable the Board and CalPERS investment professionals to better manage risk.

In early 2011, the CalPERS Board is scheduled to review its assumed rate of return for investments. The current rate is 7.75 percent.

(press release)

CalPERS is the nation’s largest public pension fund with about $228 billion in market assets. The pension fund provides retirement benefits to more than 1.6 million State, public school, and local public agency employees, retirees, and their families, and health benefits to nearly 1.3 million members...Corporate website: Source
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