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CalPERS: Targeted Investment Programs And Manager Restructure Update
MARKETS Calpers Struggles as Its Return Falls Short Largest U.S. pension fund earned 2.4% in fiscal 2015, shy of 2.5% goal By TIMOTHY W. MARTIN WSJ Updated July 13, 2015 6:43 p.m. ET The California Public Employees’ Retirement System fell short of its annual return target in fiscal 2015, as public pensions around the U.S. struggle through one of their worst years since the financial crisis.
The $301 billion pension fund, the largest in the U.S. by assets and known as Calpers, said it earned 2.4% on its investments for the fiscal year ended June 30 because of a slump in the markets and weak private-equity returns. The performance was just shy of its internal goal of 2.5%. It was Calpers’ poorest year since 2012, when it earned 1%, and down from 18.4% in 2014. Pension investments have been challenged this year by low interest rates, uneven market performance and the recovery of the U.S. dollar, which has weakened gains in global stocks. Calpers played down the importance of its 2015 performance, noting that the pension fund had topped three- and five-year internal targets with returns of 10.9% and 10.7%. Calpers assumes it will produce annual returns over the long run of 7.5%.
“We try not to get too fixated or excited about any one-year return,” said Calpers Chief Investment Officer Ted Eliopoulos on Monday at a board meeting. “The strength of our long-term numbers gives us confidence that our strategic plan is working,” Mr. Eliopoulos, who was named CIO last year, has moved Calpers to simplify its portfolio and dial down the risk. Those moves include halving the number of external money managers it works with by 2020, plus winding down its hedge-fund program. Reducing risk in its portfolio also could have the effect of missing out on outsize returns. “It’s a marathon, not a sprint,” he said. “Nobody expects stable 7.5% or 8% returns year in, year out.” http://www.wsj.com/articles/calpers-return-falls-short-of-annual-target-1436802617 Tough Times For Broadly Diversified Portfolios How’s your globally diversified strategy faring these days? Having a tough time? You’re not alone–the headwinds are fierce. For the first time in recent memory, the overwhelming majority of the major asset classes are in the red on a trailing one-year basis. As a result, broadly defined asset allocation strategies are suffering, at least relative to the stellar numbers in recent years.
Using a set of ETF proxies for the trailing 250-day (1 year) total return, only US stocks, US REITs (real estate investment trusts), and US bonds (broadly defined) are posting gains among the major asset classes. By contrast, the other 11 asset classes are in varying states of loss over that period.... The lesson, of course, is that mean reversion is alive and well when it comes to market (and portfolio strategy) returns.
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Calpers Struggles as Its Return Falls Short
Largest U.S. pension fund earned 2.4% in fiscal 2015, shy of 2.5% goal
By TIMOTHY W. MARTIN WSJ
Updated July 13, 2015 6:43 p.m. ET
The California Public Employees’ Retirement System fell short of its annual return target in fiscal 2015, as public pensions around the U.S. struggle through one of their worst years since the financial crisis.
The $301 billion pension fund, the largest in the U.S. by assets and known as Calpers, said it earned 2.4% on its investments for the fiscal year ended June 30 because of a slump in the markets and weak private-equity returns. The performance was just shy of its internal goal of 2.5%. It was Calpers’ poorest year since 2012, when it earned 1%, and down from 18.4% in 2014.
Pension investments have been challenged this year by low interest rates, uneven market performance and the recovery of the U.S. dollar, which has weakened gains in global stocks.
Calpers played down the importance of its 2015 performance, noting that the pension fund had topped three- and five-year internal targets with returns of 10.9% and 10.7%. Calpers assumes it will produce annual returns over the long run of 7.5%.
“We try not to get too fixated or excited about any one-year return,” said Calpers Chief Investment Officer Ted Eliopoulos on Monday at a board meeting. “The strength of our long-term numbers gives us confidence that our strategic plan is working,”
Mr. Eliopoulos, who was named CIO last year, has moved Calpers to simplify its portfolio and dial down the risk. Those moves include halving the number of external money managers it works with by 2020, plus winding down its hedge-fund program. Reducing risk in its portfolio also could have the effect of missing out on outsize returns.
“It’s a marathon, not a sprint,” he said. “Nobody expects stable 7.5% or 8% returns year in, year out.”
http://www.wsj.com/articles/calpers-return-falls-short-of-annual-target-1436802617
Tough Times For Broadly Diversified Portfolios
How’s your globally diversified strategy faring these days? Having a tough time? You’re not alone–the headwinds are fierce. For the first time in recent memory, the overwhelming majority of the major asset classes are in the red on a trailing one-year basis. As a result, broadly defined asset allocation strategies are suffering, at least relative to the stellar numbers in recent years.
Using a set of ETF proxies for the trailing 250-day (1 year) total return, only US stocks, US REITs (real estate investment trusts), and US bonds (broadly defined) are posting gains among the major asset classes. By contrast, the other 11 asset classes are in varying states of loss over that period.... The lesson, of course, is that mean reversion is alive and well when it comes to market (and portfolio strategy) returns.
With Charts
http://www.capitalspectator.com/tough-times-for-broadly-diversified-portfolios/