By Marcie Frost, Chief Executive Officer, CalPERS
We’re nearly two full years into a pandemic that has touched all of our lives so deeply, and I hope this message finds you healthy and safe.
We’ve spent much of the past 12 months examining our investment portfolio and gathering insight and analysis from leading financial professionals about what’s ahead for the global economy. No one can predict the future. But we’ve been steadily building a foundation for sustained success with a strategy to take advantage of the opportunities in good economic times and bad.
Let me explain why we’re ending this year with a strong sense of optimism about the next.
A Year of Achievement
We closed our fiscal year, which runs from July 1 through June 30, with a solid 21.3% return on our investments. That’s triple our target return. As we approach the end of the year, our diversified portfolio of public and private assets continues to grow along with the global financial markets.
CalPERS is the largest public pension in the United States, with a fund valued—as I write this—at nearly $500 billion. We have the size, professional expertise, and reputation to take advantage of appropriate investment opportunities whenever they present themselves.
With the strong investment earnings, our funded status, a measure of the percentage of funds available to pay all benefits owed now and in the future, grew to 80%, up from just 68% in 2016. The strategy we’ve put in place over the past few years has put us on the right track to achieve our goal of full funding.
Like so many of you, most of us continued to work remotely during the year. Yet our efforts on your behalf never stopped, as we paid out nearly $10 billion in health benefits and over $27 billion in pension benefits. I’m proud of how we maintained our high customer service standards while working remotely. But I’ll tell you that I am eagerly looking forward to next month when we finally plan to begin returning to the office.
The Outlook for 2022
As we enter the new year, we’ll concentrate on implementing the new mix of investments we adopted last month. Financial experts will tell you that what assets you choose to invest in and what percentage of your funds you allocate to each are keys to successful investing. The work ahead includes increasing investments in the private markets, which investment experts project will offer some of the highest returns over the long term.
It will take time to reach our targets, but over the years strong earnings from private asset investments have contributed billions to the CalPERS fund.
We’ll also continue to focus on the impact of climate change. This is a bottom-line financial issue for CalPERS. We own shares in over 5,000 public companies around the world, and when they do well our fund does well too. But smart investing depends on fully understanding the risks a potential investment faces, and so we advocate for policies that require companies to disclose the effect a changing climate has or likely will have on their operations. We also press them to prepare for the transition to the low-carbon economy of the future. We have a duty to work on your behalf for the good of the CalPERS fund.
On health care, CalPERS is the largest purchaser of public employee health benefits in California and the second largest public purchaser in the nation after the federal government. Our size and extensive collection of health care data drive innovation.
The pandemic has shown us how important high-quality behavioral health care and telehealth care are to our members. In 2022, we will continue our aggressive efforts to improve behavioral health prevention and treatment and increase access to both. We’ve also introduced a health equity initiative aimed at ensuring care is equitable for all members, regardless of race, ethnicity, gender identity, or sexual orientation.
Throughout the changes and challenges of the year, our commitment to retirement security and to deliver the benefits you have earned has never wavered. On behalf of the CalPERS team, happy holidays, and may you have a safe and healthy New Year!