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CalSTRS RE returns decline in recent fiscal year

Yet California’s second-largest public pension system still posted a stronger real estate performance than fellow California state pension CalPERS.

The California State Teachers’ Retirement System (CalSTRS) saw its real estate portfolio slightly underperform its benchmark in the asset class during its most recently completed fiscal year, according to preliminary results that were released earlier this week.

The $188.7 billion pension system, which has 13.9 percent of its portfolio invested in real estate, returned 1.4 percent overall and 11.1 percent in real estate for the 12-year period ending June 30. The asset class’ custom benchmark return was 12.6 percent. By comparison, CalSTRS’ portfolio returned 4.8 percent overall and 13.4 percent in real estate during fiscal year 2014 to 2015, performing 1 percent over the real estate benchmark.

“Volatility in the equity markets and the recent June 23 UK referendum to exit the European Union, also known as Brexit, left CalSTRS’ $188.7 billion fund about where it started the fiscal year in July 2015,” the pension system said in a statement earlier this week.

Although CalSTRS underperformed its real estate benchmark, it still fared better than fellow California state pension, California Public Employees’ Retirement System (CalPERS), which reported its preliminary 2015 to 2016 fiscal year results earlier this week. The $302 billion pension system saw real estate generate a net return of 7.1 percent for the fiscal year that ended June 30, 5.6 percent under its real estate benchmark.

“The primary drivers of relative underperformance were the non-core programs, including realized losses on the final disposition of legacy assets in the opportunistic program,” the pension system said in a statement. CalPERS did not respond to questions about why it realized losses on those dispositions.