Soaring Stocks Help CalPERS to 15.4% Gain for the Year

The California Public Employees’ Retirement System, the nation’s largest public pension fund, said its portfolio earned 15.4% in the fiscal year ended June 30, boosted again by Wall Street’s surge.

That compares with a 16.4% return in fiscal 1995 and a 2.5% return in fiscal 1994. Stock and bond markets had been hurt in 1994 by rising interest rates.

CalPERS’ portfolio, which represents future retirement benefits for state employees, reached $100.7 billion as of June 30, up from $87.8 billion a year earlier and $61.8 billion in 1991.

The fund has been increasing the percentage of its portfolio held in stocks since December 1994 in an effort to raise the portfolio’s overall return in the long term. CalPERS said U.S. and foreign stocks were 61% of assets at June 30, up from 49.2% a year earlier.

Bonds composed 34% of assets at June 30, down from nearly 40% a year earlier. The rest of the fund is invested in real estate and “alternative” investments.

CalPERS’ stock portfolio alone, including foreign shares, earned 24% in fiscal 1996, the fund said. In contrast, the blue-chip Standard & Poor’s 500-stock index gained 26% in that period. CalPERS’ return may have been hurt by lagging performances of some foreign stock markets. Nonetheless, CalPERS’ outside pension consultant, Wilshire Associates, said the fund “should be very pleased” with its returns in recent years.

Thanks to the rocketing stock market, the average annual return on the total fund over the last five years was about 12%, well above the fund’s 8.5% “actuarial assumption” rate, the minimum acceptable annual return given the huge pension obligations CalPERS will face in years to come as state workers retire and begin drawing benefits.