GLOBAL - The California Public Employees' Retirement System (CalPERS), the largest pension fund in the US, returned 22.7% in fiscal year ending last month, its best in 14 years.
The fund beat its benchmark by 55 basis points, with all asset classes outperforming their benchmarks except real estate, according to chief investment officer Joseph Dear.
The real estate division registered its first positive gain since 2007 due to the strong performance of its core public and private portfolio.
However, the total property portfolio was nearly 10 percentage points below its benchmark of 20%, mainly due to a 1.6% loss in its non-core portfolio.
Senior investment officer for real estate Ted Eliopoulus said the weak performance of non-core portfolio, which accounted for 50% of the total real estate portfolio, contributed to the underperformance.
The non-core, or opportunistic, portfolio is made up largely of housing and land development, as well as the repositioning of properties.
Eliopoulus said the core portfolio performed very well relative to its benchmark and that the public REIT portfolio met its benchmark.
The private portfolio - which accounts for 43% of the overall portfolio - posted a 29% positive return for the year compared with its benchmark's 16%.
Eliopoulus said he was cautiously optimistic about the housing market.
"We're hoping for a housing recovery in the future, but not selling properties in the housing portfolio at fire-sale prices," he said.
Of CalPERS's commercial real estate portfolio, about half is in the US, he said, with a smaller part of commercial real estate in emerging markets, particularly the BRIC counties.
At year-end, the pension fund's total assets under management stood at $237.5bn (€147.6bn), still down from the peak of $260bn reported in October 2007.