CalSTRS pension fund exceeds annual returns target — ahead of schedule
The California State Teachers’ Retirement System reported an 8.5% return in the fiscal year that just ended, exceeding its internal target. The annual performance, while notable, is viewed by CalSTRS as a step towards consistent long-term growth for more than one million California educators’ pensions.
The return puts CalSTRS ahead of schedule to reach full funding by 2046, according to its preliminary returns statement sent on Wednesday. The 7% annual average return target is set to meet pension obligations.
“While the 8.5% return over the past year is a solid result, our true commitment lies in creating consistent, decades-long growth for our members’ pensions,” Chief Investment Officer Scott Chan said in a statement.
Managing about $367.7 billion, CalSTRS is the largest educator-only fund in the world. The report released on Wednesday showed an 8.1% return on investments over a 10-year period and a 9.4% return over a five-year period.
Keith Brainard from the National Association of State Retirement Administrators explained that the long-term return numbers are more significant than the one-year reports.
“A year is really not enough time to draw meaningful conclusions because in any given year, the asset class can do well or do poorly,” Keith Brainard said.
CalPERS, California’s largest pension system, released a report in early July on its annual returns seemingly higher than CalSTRS. However, Brainard said while it can be tempting to compare the two, it’s “apples and oranges” to compare the two largest state pension systems.
“If you want to compare them, you have to line up the levels of risk that they’re taking and the types of assets they’re investing in and the amount that they’re investing in those asset classes,” Brainard said.
The system’s best performing asset class, public equity investments, provided a return of 16.3% for the fiscal year. The investment constitutes the largest portion of CalSTRS’ portfolio at 41.25% of holdings. Meanwhile, private assets account for 35% of CalSTRS investment portfolio and primarily are in real estate and private equity.
Brainard explained that historical trends show that private equity is expected to outperform public equity, with the exception of a few circumstantial years. However, private equity is considered riskier than public equities, he said.
CalSTRS 5-, 10-, 20- and 30-year returns all surpass the investment assumption of 7%, despite inflation, rising interest rates and geopolitical uncertainty, according to the report.
“This return reflects our hard work and innovative approach to protecting the future of more than 1 million California public educators and beneficiaries who rely on us to help secure their financial future,” CalSTRS CEO Cassandra Lichnock said in a statement. “This strong return marks another step as we continue our steady progress toward achieving full funding.”
This story was originally published July 31, 2025 at 3:45 PM with the headline "CalSTRS pension fund exceeds annual returns target — ahead of schedule."