Big California Pension Fund Returns 11.6% in Year. But It Lags Behind the S&P 500, Stock/Bond Mix.

The California Public Employees’ Retirement System building in Sacramento, Calif. (Max Whittaker/Getty Images)

Calpers, the huge California pension fund, reported a preliminary investment return of 11.6% for its 12-month period ended in June, behind the S&P 500 index and a 70/30 blend of the S&P 500 and a broad index of U.S. bonds.

The Calpers results released Monday offer a good read of how big university endowments are likely to have performed in the year ending in June since the pension fund invests in many of the same asset classes, including private equity and private credit. Many of the large university endowments report results for their June fiscal years starting in September.

Calpers, which has $556 billion in assets, is one of the first big pension funds to report results for the June fiscal year. It’s also one of the largest pension funds in the country.

The fund highlighted what it termed strong returns in the June year that topped its discount rate of 6.8%, which is also an assumed annual rate of return; the returns also topped a benchmark used to gauge performance by 1.7%.

The 11.6% return, however, trailed the S&P 500, which returned 15% in the year ended June and a 70/30 blend of the S&P 500 and the iShares Core Aggregate Bond exchange-traded fund, a broad U.S. bond index, Barron’s calculates. That 70/30 blend gained about 12.4%, Barron’s estimates. Non-U. S. stocks also outperformed Calpers with iShares Core MSCI EAFE ETF returning nearly 19%.

During the 2023-2024 fiscal year ending in June, Calpers, or the California Public Employees’ Retirement System, returned 9.3%, about a percentage point higher than the average of the eight Ivy League endowments.

Calpers has sought to boost what had been lackluster returns in part by restructuring its private-equity investments and it reported progress in the latest report. The fund still has a nearly 40% exposure to public equities, more than many of the Ivy endowments.

Calpers’s 10-year annualized return of 7.1% is way behind the S&P 500’s 13.5% annualized return and the 10% yearly return of a 70/30 blend of the S&P 500 and U.S. bonds. That return also is behind those of many of the big Ivy endowments.

The Calpers returns for the 12 months ending in June could rise when full figures are compiled since private-investment returns are lagged by a quarter and public-equity markets were strong in the March-June quarter with the S&P 500 gaining about 10%.

Calpers preliminary private-equity returns were 14.3% for the year ended in June.

Private-equity critics like billionaire investor Bill Ackman have argued that returns are overstated. Ackman has directed much of his critique at the Harvard University endowment—Ackman is a Harvard alumnus.

Write to Andrew Bary at andrew.bary@barrons.com