The recent returns at the $302 billion California Public Employees’ Retirement System (CalPERS) might seem slight at 0.61% for the twelve months ended June 30. But over a difficult market environment for investors, where the S&P 500 basically marched in place, those returns don’t seem as dismal.

Calipers 2016 performance

A year of beating benchmarks doesn’t meet asset growth goals

CalPERs has had an active past few years, indeed. In 2014, after putting to bed a pay for play investment scandal, the fund eventually shed itself of hedge fund investments in a very public fashion.

Then, after reporting a paltry 2.4% year over year returns in 2015 – when the S&P 500 was up nearly 7% over the same time frame — one of the world’s largest pension fund manager is again posting scant returns. While many pension funds model 5% to 7% annualized returns into formulas to keep up with pension demands, this year CalPERs is coming up short of overall growth goals.

The fund was relatively upbeat in a statement, noting that they beat benchmarks and were pulled down by international stocks.

“CalPERS achieved the positive net return despite volatile financial markets and challenging global economic conditions,” the pension fund said in a statement. “Key to the return was the diversification of the Fund’s portfolio, especially CalPERS’ fixed income and infrastructure investments.”

Fixed income, infrastructure and real estate investments were winners

Fixed Income delivered a sizable 9.29% return, which was just below its benchmark by two basis points in a negative interest rate environment. Infrastructure was another winning segment with an 8.98% percent return, besting its benchmark by 4.02%, or 402 basis points.

The major detractor was publically traded equities, which subtracted -3.38% from gains. It was international stocks that put the brakes on markets CalPERS’ performance, but CalPERS stock picking prevailed and the program still managed to beat its benchmark by 58 basis points. “Positive performance in a year of turbulent financial markets is an accomplishment that we are proud of,” said Ted Eliopoulos, CalPERS Chief Investment Officer. “Over half of our portfolio is in equities, so returns are largely driven by stock markets.”

The fund’s Real Estate program was a winner with a 7.06% return, but here it underperformed its benchmark by 557 basis points. The pension fund attributed much of the underperformance to non-core programs, including losses on the final disposition of legacy assets in the Opportunistic program.

“It’s important to remember that CalPERS is a long-term investor, and our focus is the success and sustainability of our system over multiple generations,” said Henry Jones, Chair of CalPERS Investment Committee. “We will continue to examine the portfolio and our asset allocation, and will use the next Asset Liability Management process, starting in early 2017, to ensure that we are best positioned for the future market climate.”