The California Public Employees Retirement System says it realized a return of 2.4 percent on investment for the fiscal year that ended last month. That’s well below the 7.5 percent target CalPERS has set in order to meet its pension obligations without requiring higher contributions from the state and local governments.
“Obviously, it’s a bad return for a single year,” says Prof. Alicia Munnell, a state and local pensions expert at Boston College’s Center for Retirement Research.
“Although the past few years seem very good, the fiscal year was not that great in the stock market,“ Munnell says. “So in some sense, CalPERS’ performance in that one year reflects that ho-hum stock market during the period.”
But, Munnell says, it's important to look at the bigger picture.
“Over the long run, if it’s going to improve its financial status, it needs to earn at least 7.5 percent,“ Munnell says. “And so seeing a 2.4 certainly grabs your attention, but we’ve got to look at it over a longer period than one single year.”
And that’s why she says this year’s return on its own is no reason to panic. Even with this disappointing return, CalPERS has realized three- and five-year averages of nearly 11 percent.