June 30, 2006
On behalf of CalPERS Investment Operations, I am pleased to present reports on the pension fund’s investments, California investments, our investment performance, and investment-related fees and costs for the period ended June 30, 2006. This data was compiled by our Investment Operations staff, our pension consultant Wilshire Associates, and our master custodian State Street Bank & Trust. It is presented in accordance with statutes found in the Retirement Law. We voluntarily follow Association for Investment Management & Research performance and ethics standards.
We earned an 11.8 percent return (net of fees) on our investments for the one-year period ended June 30, 2006, raising our portfolio market value to a record $212.1 billion.
We exceeded industry benchmarks in five of eight major investment portfolios during the fiscal year, and our Investment staff added approximately $2.8 billion to the fund, mainly by taking advantage of developing market opportunities.
Our strong performance marked the third straight year we earned double-digit returns. Our average annual investment return over the last 10 years is 9 percent.
At the end of the fiscal year, 61.2 percent of our portfolio was invested in public equity, 24.5 percent in bonds and other fixed income, 7.2 percent in real estate, 5.7 percent in private equity, and 1.4 percent in cash equivalents.
We continued to invest in the State of California, providing a strong economic boost for California’s growth. At the end of the year, we had nearly $26 billion invested or committed for investment in California entrepreneurial businesses, real estate, housing, urban infill, and stocks and bonds in corporations that make California their home.
We enhanced our diversity outreach to emerging investment managers during the year to ensure that we were working with the broadest possible investment talent, perspectives, and experiences. We also implemented a number of environmental initiatives aimed at achieving positive financial returns, while fostering sustainable growth and sound environmental practices.
And finally, in the area of corporate governance, we launched an independent investigation into allegations of stock option backdating at more than 80 companies, we signed the United Nations Principles for Responsible Investment – a menu of possible global actions on environmental, social, and corporate issues – and we barred investments in nine companies until the government of Sudan halts the genocide.
Chief Investment Officer