California's two big pension funds report huge returns

What a difference a cooperative stock market makes. The California Public Employees' Retirement System earned 20.7 percent for the 12 months ended June 30, the best result in 14 years. The almost-as-big California State Teachers' Retirement System earned 23.1 percent. That's the good news. The not-so-good news is that pension fund performance is measured over many years in order to smooth out the ups and downs - and on that basis, they still have a ways to go: Calpers' five-year average return is 3.4 percent, and the average 10-year return is 5.4 percent, well below the 7.75 percent that's required to meet its obligations. From Bloomberg:

Calpers had assets of about $225 billion when Lehman Brothers Holdings Inc. went bankrupt in September 2008, leading to a panic that wiped out more than $6 trillion in U.S. stock- market value in about six months. Calpers value plummeted to $164.7 billion by Jan. 31, 2009. It had reached $251 billion at the end of June 2007, climbing to a record of about $260 billion in October of that year, just before the global recession began. The 13-member Calpers board in March voted to keep the expected rate of return on assets at 7.75 percent. They rejected a recommendation from actuaries to lower it to 7.5 percent, which was based on projections for market returns to trail historical averages. Some board members expressed concern at the time that a lower rate would have burdened local governments by forcing them to put more cash into the fund as they were already facing financial strains.