The California State Teachers Retirement System’s (CalSTRS) real estate portfolio posted an 8.1% return in its 2016-17 financial year.
The result beat its return benchmark, the NCREIF ODCE index, by 70 basis points.
The real estate return also beat the State of California’s other major public pension fund: the California Public Employees’ Retirement System’s allocation gained 7.6% over the same time period.
Christopher Ailman, CIO at CalSTRS, said: “We intentionally keep our eyes focused on a 30-year horizon and make our adjustments with that timeframe in mind, rather than reactively responding to any given situation at hand.”
CalSTRS has 12.6% of its $208.7bn (€178.9bn) investment portfolio currently invested in real estate. It has a 13% target allocation for the asset class.
Most of CalSTRS’ real estate capital has been placed into a mixture of office, industrial, retail, and apartments investments. It has used a number of structures including separate accounts, joint ventures, and commingled funds.
CalSTRS’ infrastructure allocation sits separately within its “inflation sensitive” portfolio, which gained 9.1%. As well as infrastructure, the inflation sensitive portfolio also includes global inflation-linked securities.
The pension fund has invested $1.5bn in infrastructure, less than 1% of its assets. Its target is 4% of the overall investment portfolio.