The California Public Employees’ Retirement System (CalPERS), the largest public pension fund in the U.S., reported a preliminary 18.4% return on investments for the 12 months that ended June 30, 2014, according to an official announcement.
CalPERS’ 18.4% return is well above the fund’s discount rate of 7.5%, the long-term return required to meet current and future obligations. CalPERS 20-year investment return is 8.5%, while its return since 1988 is 8.9%.
The gain marks the fourth double-digit return the pension fund has earned in the last five years. Returns were led by strong performances by its public equity and real estate investments, each returned 24.8% and 13.4% respectively, both outperforming its benchmarks.
Its investments in private equity returned 20%, fixed income returned 8.3%, and hedge fund investments returned 7.1%.
CalPERS, with assets at over US$300 billion at the end of the fiscal year, recorded current funding level of 76% as of June 30, 2014 based on the recent earnings. Funding level is the amount of assets CalPERS has to pay current and future benefits.
CalPERS has invested in numerous China-focused private equity and venture funds. According to CalPERS’ emerging markets fund investments disclosure, it invested US$10 million in CDH Ventures Partners Fund 2 and US$10 million in GSR Ventures III, both raised in 2008. The two funds have current net IRR (internal rate of return) of 9.2% and 4.2% as of the end of 2013.
CalPERS also invested US$15 million in DT Capital China Growth Fund, US$12.4 million in Hony Capital Fund 2008, L.P. and US$10 million in New Horizon Capital III. The three funds recorded net IRR of 6.9%, 2.5% and 16.3% as of the end of 2013.