Double-digit infrastructure returns lifts CalPERS's real assets investments

California Public Employees Retirement System (CalPERS) recorded a return of 8% on real assets investments over the past 12 months, helped by its infrastructure programme which delivered double-digit returns.

For the 12 months ending 30 June 2018, the $351bn (€302bn) pension fund said the net rate of return on infrastructure was 20.6%, more than double the 9.9% a year earlier.

CalPERS outperformed its infrastructure benchmark – 400bps above the consumer price index – by 1416 bps.

Late last year, investment committee meeting documents showed that the $3.8bn infrastructure portfolio outperformed its benchmark by 3.4 percentage points.

Infrastructure investments represented about 1% of CalPERS’s total assets, which were valued at $323bn in fiscal 2017.

Real estate investments generated a 6.8% return over the 12-month period, down from 7.6% during the previous fiscal year.

Real estate accounts for around $30.5bn of the pension fund’s total assets, placing it seventh in IPE Real Assets’ Top 100 Real Estate Investors 2018.

Forestland which also forms part of the real assets allocation recorded a return of 1.9% in fiscal 2018, up from 1% the year earlier.

Together with all the other asset classes, the biggest US state pension plan reported an 8.6% net return on investments during the period, a performance it said was also helped by a 16.1% return from its private equity programme and an 11.5% return from its public equity investments.

Ted Eliopoulos, CIO of CalPERS, said: “I am pleased we were able to exceed our expected rate of return based on our strong performance in the private and public equity portfolios.

“While it’s important to note the portfolio’s performance at the 12-month mark, I can’t emphasize enough that we are long-term investors. We will pay pensions for decades, so we invest for a performance that will sustain the fund for decades.”

Marcie Frost, CEO of CalPERS, said: “While we are pleased with the positive returns, we’re focused on improving our funded status.

“This will take time and will require us to explore new, forward-thinking approaches to our investments, particularly in private equity. Our primary goal is to ensure that our fund is strong for years to come.”