CalSTRS
The California State Teachers' Retirement System (CalSTRS) is a public pension fund established in 1913 to provide retirement, disability, and survivor benefits exclusively to California's public school educators and their beneficiaries.[1] As the largest educator-only pension fund globally, it serves approximately one million active members and 700,000 retirees, managing a diversified investment portfolio to fund these defined benefit obligations.[1] Governed by a 12-member Teachers' Retirement Board, CalSTRS oversees assets totaling about $382.4 billion as of September 30, 2025, with investments spanning equities, fixed income, real estate, and private markets.[2][3] CalSTRS has achieved notable investment returns in recent years, posting an 8.5% net return for fiscal year 2024-25, surpassing its benchmark and contributing to portfolio growth.[4] Its funded status for the Defined Benefit Program improved to 76.7% as of June 30, 2024, positioning it ahead of schedule to reach full funding by 2046 under the 2014 funding plan, which raised contribution rates from members, employers, and the state to address prior underfunding stemming from optimistic actuarial assumptions and market downturns.[5][4] Despite these advances, the system faces ongoing risks from investment volatility, demographic pressures, and longevity increases, with investment returns identified as the primary uncertainty in sustaining benefits.[6] As a major institutional investor, CalSTRS exercises significant influence through active ownership, including proxy voting and engagement on governance issues, though its strategies have drawn scrutiny over allocations to alternative investments and occasional program losses, such as in securities lending.[7] The fund's scale underscores its critical role in California's fiscal landscape, balancing educator retirement security against taxpayer and contributor burdens amid debates on public pension sustainability.[8]
History
Establishment and Early Development
The California State Teachers' Retirement System (CalSTRS) was established by state legislation in 1913 to provide retirement, disability, and survivor benefits to public school educators in California, from kindergarten through community college levels.[9] This creation followed advocacy by the California Teachers Association (CTA), whose state council had resolved in 1910 to pursue a unified statewide pension system for teachers amid fragmented local retirement arrangements.[10] The system's formation addressed the lack of secure post-employment income for educators, relying initially on modest defined benefit pensions funded through member and state contributions. At inception, CalSTRS operated with approximately 15,000 members and no initial assets, reflecting its startup phase as a pay-as-you-go program where benefits were disbursed from contemporaneous inflows.[11] Contributions consisted of a fixed $12 annual payment from each member alongside state appropriations equivalent to a specified portion of salary averages, though benefits remained limited, with early retirees receiving an average of $500 per year.[12][11] Governance fell under a board structure, with administrative operations centered in Sacramento, enabling gradual enrollment as California's public education sector expanded post-World War I. Early development emphasized building membership and stabilizing payouts amid economic fluctuations, including the Great Depression, which strained funding without dedicated investment reserves until later reforms.[12] By the 1920s, participation grew alongside school system enrollment, but the program's reliance on annual state support and flat member dues highlighted vulnerabilities, prompting incremental legislative adjustments to contribution rates and eligibility to sustain solvency.[10] These foundations laid the groundwork for CalSTRS's evolution into a major pension entity, though early years were marked by conservative benefit formulas and limited scope compared to subsequent expansions.Major Reforms and Legislative Changes
In response to growing unfunded liabilities, the California Legislature enacted the Public Employees' Pension Reform Act of 2013 through AB 340 (Chapter 296, Statutes of 2012), effective January 1, 2013, which fundamentally altered CalSTRS benefit structures for new members. Members hired on or after that date were placed in a hybrid retirement tier featuring a reduced defined benefit formula of 2% at age 62 (compared to 2% at 60 for prior members), mandatory employee contributions covering at least 50% of the plan's normal cost (ramping from 8% to 10.25% or more based on actuarial valuation), and strict compensation limits capping pensionable pay at 120% of the Social Security taxable wage base (approximately $168,600 in 2024, adjusted annually). Additional anti-abuse provisions prohibited retroactive benefit enhancements, pension holidays, and certain service credit purchases while requiring reporting of post-retirement compensation exceeding specified thresholds to prevent spiking.[13][14][15] To address CalSTRS's acute funding crisis, with unfunded liabilities surpassing $70 billion as of June 30, 2013, AB 1469 (Chapter 47, Statutes of 2014) implemented a 30-year funding plan aimed at achieving full funding by fiscal year 2045-46 under then-current actuarial assumptions. The measure maintained member contributions at a flat 8% of creditable pay but escalated employer rates from 8.25% in 2014 to a sustained 19.1% starting in 2020-21, while introducing state supplemental contributions (up to 6% of payroll or more) triggered by investment performance exceeding benchmarks or risk reduction efforts. It also established mechanisms for emergency apportionments if liabilities grew faster than projected and prioritized paying down the unfunded obligation over benefit increases.[16][17][18] Other notable legislative adjustments include AB 135 (2000), which enhanced purchasing power protection by guaranteeing retirees at least 80% (later adjusted to 85% via subsequent measures) of their original benefit's value against inflation through supplemental payments from the Teachers' Retirement Fund when COLAs fell short, and AB 1389 (2014), which imposed limits on concurrent retiree benefits and post-retirement employment to curb overlapping payouts. These changes, alongside PEPRA's conforming amendments via AB 1381, sought to balance fiscal sustainability with member protections amid ongoing actuarial pressures from demographic shifts and market volatility.[19][20]Funding Crises and Recovery Efforts
The California State Teachers' Retirement System (CalSTRS) has maintained an unfunded liability for much of its history, with funding challenges intensifying after benefit expansions in the late 1990s, stock market declines in 2000–2002 and 2008, and stagnant contribution rates since 1972.[21] By June 30, 2013, the Defined Benefit Program's funded ratio stood at 66.5 percent, with an unfunded actuarial obligation of $73.7 billion, and projections indicated asset depletion around 2046 absent reforms.[6] [22] This situation stemmed from statutory contribution rates insufficient to cover accruing liabilities amid lower-than-assumed investment returns and demographic pressures like increasing longevity.[21] In response, the California Legislature enacted Assembly Bill 1469 in June 2014 as part of the state budget, establishing a comprehensive funding plan to eliminate the unfunded liability by fiscal year 2045–46.[23] The plan phased in higher contributions: member rates rose from 8 percent to 10.25 percent by July 2018; employer rates increased gradually to 19.1 percent by July 2021; and the state's apportionment climbed to approximately 10.8 percent, incorporating supplemental payments for benefit maintenance.[23] [21] It also granted the Teachers' Retirement Board authority to adjust employer and state rates within statutory limits if necessary to maintain progress, while excluding certain pre-2013 liabilities from immediate amortization to prioritize solvency.[21] Since implementation, the funding plan has advanced ahead of projections, supported by strong investment performance, including an 8.4 percent net return in fiscal year 2023–24 exceeding benchmarks.[24] The funded ratio improved to 75.9 percent as of June 30, 2023, and 76.7 percent by June 30, 2024, with the unfunded obligation declining relative to assets despite absolute growth from ongoing accruals.[6] [25] Contribution rates have remained stable without board adjustments, as payroll growth and returns have aligned with or exceeded assumptions.[26] Ongoing recovery efforts emphasize risk monitoring, including annual reviews of investment assumptions, demographic trends, and market volatility, with mechanisms to accelerate amortization if returns underperform.[27] While the plan has mitigated depletion risks, vulnerabilities persist from potential economic downturns or extended member lifespans, prompting actuarial recommendations for conservative return forecasts around 6.75–7 percent.[6] The state's share of the unfunded liability is projected to phase out by the mid-2020s under current trajectories.[23]Purpose and Structure
Legal Foundation and Mission
The California State Teachers' Retirement System (CalSTRS) was established by the California Legislature in 1913 through legislation creating a pension system for public school educators.[28] This foundational act initiated a defined benefit retirement plan to ensure financial security for teachers upon retirement, with subsequent amendments expanding coverage and benefits.[29] CalSTRS operates under the authority of the Teachers' Retirement Law, codified in Parts 13 (Defined Benefit Program), 13.5 (Social Security Integration), and 14 (Cash Balance Benefit Program) of Division 1 of the California Education Code.[29] These provisions outline membership eligibility, contribution requirements from members, employers, and the state, benefit calculations, and fiduciary responsibilities of the governing Teachers' Retirement Board.[29] The system functions as a state agency, independent from general fund appropriations for core operations, though state contributions address funding shortfalls as mandated by law.[28] The mission of CalSTRS is to secure the financial future and sustain the trust of California's educators by delivering retirement, disability, and survivor benefits while prudently managing assets to meet long-term obligations.[28] This entails actuarial oversight, investment strategies aligned with state law, and compliance with constitutional protections against impairment of vested pension rights under Article XVI, Section 17 of the California Constitution.[28]Membership Eligibility and Demographics
Membership in the California State Teachers' Retirement System (CalSTRS) Defined Benefit Program is mandatory for most employees of California's public schools, from prekindergarten through community college, who perform creditable service in positions requiring a credential, certificate, or permit issued by the California Commission on Teacher Credentialing, or who meet equivalent minimum standards for certification.[30][31] Certain classified employees, such as those in administrative roles without certification requirements but employed by participating employers, may elect membership if they meet service credit thresholds, though eligibility excludes substitute teachers with less than specified service and certain part-time or temporary positions.[32][33] Membership vests after five years of service credit, entitling members to lifetime benefits upon retirement, subject to age and service requirements.[34] As of fiscal year 2024 (ended June 30, 2024), CalSTRS reported 467,449 active members and 239,442 inactive members, totaling 706,891 active and inactive members, with over 1 million members and beneficiaries overall.[35][36] The membership base reflects an aging workforce, with the number of active members eligible for retirement projected to exceed 100,000 in 2024 and peak higher in subsequent years due to historical hiring patterns from the 1990s and early 2000s.[37] Average age at membership entry is 30.6 years, with retirement occurring at age 63 after 25.2 years of service on average; post-retirement, male members receive benefits for 24.9 years on average, compared to 27.3 years for females, aligned with life expectancy estimates of 88 years for males and 91 for females.[38][39] These demographics underscore a system serving primarily educators, with trends indicating sustained demand for replacement hiring amid retirements.[40]Benefit Programs Overview
The California State Teachers' Retirement System (CalSTRS) administers a hybrid retirement framework designed to provide retirement, disability, and survivor benefits to eligible public school educators and certain other employees in California's K-12 and community college systems. The primary component is the mandatory Defined Benefit Program, supplemented by the Defined Benefit Supplement Program, with alternatives like the Cash Balance Benefit Program for specific part-time roles and the voluntary Pension2 defined contribution plans for additional savings.[41] These programs collectively aim to replace 50-60% of a career educator's final salary upon retirement, though actual replacement varies by service length, age, and compensation.[42] The Defined Benefit Program offers a guaranteed lifetime monthly pension calculated as service credit years multiplied by an age factor (up to 2.4%) multiplied by final compensation, which is the highest average annual compensation earnable during a 1-, 2-, or 3-year period depending on membership category.[30] Classic members, hired before January 1, 2013, qualify for unreduced benefits at age 60 (or age 50 with 30 years of service or age 55 with 5 years), while PEPRA members hired on or after that date qualify at age 62 (or age 55 with 5 years).[41] Disability benefits under this program are available to active members unable to perform their duties due to permanent impairment, providing a lifetime allowance based on a similar formula but adjusted for disability onset, with continued service credit accrual.[30] Survivor benefits extend to eligible spouses, registered domestic partners, or minor children of deceased members, typically as a percentage of the member's projected benefit, ensuring ongoing support.[30] Participation is mandatory for full-time certified educators, with employee contributions at 10.25% of creditable compensation as of 2023.[30] Complementing the Defined Benefit Program, the Defined Benefit Supplement Program operates as a cash balance account funded by mandatory 2% employee contributions on compensation exceeding the IRS-defined normal compensation limit (e.g., $175,000 in 2024 for most members), plus employer contributions on certain excess earnings.[43] It guarantees a minimum interest crediting rate and allows payout as an annuity, lump sum, or rollover upon retirement or disability, or after six months of separation from service, enhancing total retirement income without altering the primary pension formula.[43] The Cash Balance Benefit Program, available to part-time PreK-12 teachers (under 50% time base), community college adjunct faculty (≤60 units or 67% time base), and certain trustees with employer approval, accumulates 4% employee and 4% employer contributions plus a guaranteed interest rate (historically around 2-4%), payable as a lump sum or annuity upon separation, vesting immediately.[44] This hybrid structure serves as an alternative to the full Defined Benefit for ineligible or partial-service members, prioritizing portability over lifetime annuities. Pension2 provides optional supplemental savings through 403(b), Roth 403(b), and 457(b) plans, allowing pre-tax or Roth payroll contributions invested in low-fee funds with access to professional advice, thereby addressing gaps in Social Security coverage or personal savings needs for members across all primary programs.[45] Disability and survivor protections in supplemental programs mirror or defer to the Defined Benefit framework where applicable, ensuring coordinated benefits without overlap.[41] Overall, these programs emphasize defined outcomes for core security while incorporating cash balance elements for flexibility, funded through member, employer, and state contributions amid ongoing actuarial adjustments.[36]Governance
Teachers' Retirement Board Composition and Roles
The Teachers' Retirement Board (TRB) of the California State Teachers' Retirement System (CalSTRS) consists of 12 members serving four-year terms, except for ex officio members who serve by virtue of their state positions.[46] The board's composition, established under California Education Code § 22200 effective January 1, 2004, balances representation from educators, retirees, public officials, and independent appointees to oversee fiduciary responsibilities.[46] Ex officio members include the State Superintendent of Public Instruction, State Controller, State Treasurer, and Director of Finance, providing governmental oversight without election or appointment.[46] [36] Elected members comprise three active participants in CalSTRS Defined Benefit or Cash Balance programs: one non-administrative employee from a school district or county office of education, one additional active member from a school district or county office, and one community college faculty member, all selected via elections regulated by the board.[46] The Governor appoints five members subject to Senate confirmation: one governing board member from a school or community college district, one retired CalSTRS participant, and three public members with expertise in investment management, actuarial science, or pensions, serving staggered terms starting in 2005, 2006, and 2007.[46] This structure ensures diverse perspectives, with active and retired educators directly elected by members to represent beneficiary interests.[36]| Category | Number | Selection Method | Key Qualifications/Notes |
|---|---|---|---|
| Ex Officio State Officials | 4 | Hold office by position | State Superintendent of Public Instruction; State Controller; State Treasurer; Director of Finance. Provide fiscal and educational policy input.[46] |
| Elected Active Members | 3 | Election by CalSTRS members | 1 non-admin school district/county employee; 1 school district/county employee; 1 community college instructor. Four-year terms; service credit determines eligibility.[46] |
| Governor-Appointed | 5 | Appointment with Senate confirmation | 1 school/community college board member; 1 retiree; 3 public members (investment/actuarial expertise). Four-year staggered terms.[46] |
Executive Leadership and Staff
The executive leadership of CalSTRS is responsible for implementing the policies and strategic direction established by the Teachers' Retirement Board, overseeing day-to-day operations, and managing a workforce dedicated to administering retirement benefits and investments for over 1 million members.[36] The Chief Executive Officer (CEO) serves as the top executive, providing overall leadership, managing the annual operating budget, and directing approximately 1,240 staff members across divisions including benefits, investments, and finance.[49] Cassandra Lichnock has held the position of CEO since July 1, 2021, marking her as the first woman to lead the organization in its over 100-year history.[50][51] Supporting the CEO, the Chief Investment Officer (CIO) directs the management of CalSTRS's multi-billion-dollar investment portfolio, focusing on asset allocation, risk oversight, and performance to support long-term funding objectives. Scott Chan currently serves as CIO, recognized for contributions including being named to the Markets Group's Elite 100 CIO list in 2024.[52][53] Key roles under executive leadership also encompass the Chief Operating Officer, Chief Financial Officer, System Actuary, and senior investment directors, who handle operational efficiency, financial reporting, actuarial projections, and specialized investment strategies such as global equity, real estate, private equity, and fixed income.[54] For instance, senior investment directors like April Wilcox, Geraldine Jimenez, June Kim, and Kirsty Jenkinson advise on high-impact decisions affecting the Teachers' Retirement Fund.[52][55] CalSTRS staff, numbering in the low thousands, operate across functional areas to process member benefits, conduct investment analysis, ensure regulatory compliance, and support governance initiatives, with executive oversight ensuring alignment with fiduciary duties.[36] The organization's structure emphasizes specialized teams, including investment operations led by figures like Kelly Criss and performance compliance under Shifat Hasan, contributing to the fund's administration amid ongoing workforce succession planning through 2028.[52][56] Executive compensation and roles are periodically benchmarked against labor market standards to attract talent capable of managing the system's complex liabilities and growth objectives.[54]Oversight Mechanisms and Accountability
The Audits and Risk Management Committee of the Teachers' Retirement Board assists in overseeing CalSTRS's financial reporting, internal audit functions, external independent audits, compliance with laws and regulations, and enterprise risk management processes, ensuring fiduciary responsibilities are met through systematic evaluation and improvement of internal controls and governance.[57][47] Internal Audit Services conducts risk-based audits aligned with the organization's strategic plan, incorporating management input and enterprise risk assessments to evaluate the effectiveness of controls over operations, including investment portfolio management and benefit payments.[58][59] CalSTRS's financial statements receive annual external audits by independent certified public accountants, conducted in accordance with generally accepted auditing standards (GAAS) and Governmental Accounting Standards Board (GASB) requirements; for fiscal year 2022-23, the audit affirmed the fairness of presentation and noted no material weaknesses in internal controls over financial reporting.[11][60] Management addresses audit findings through progress reports to the board, with semi-annual updates on enterprise risks and mitigation strategies.[61] Under the State Leadership Accountability Act, CalSTRS submits annual reports detailing internal control systems, compliance monitoring, and corrective actions for identified deficiencies.[62] External accountability includes triennial reviews by the California State Controller of actuarial valuations and assumptions used in funding projections, as mandated by state law, alongside periodic audits of employer contribution compliance and overpayment recoveries.[63] The state legislature exercises oversight through the Legislative Analyst's Office, which analyzes CalSTRS funding plans, investment performance, and policy recommendations, such as enhancements to contribution mechanisms adopted in 2014.[64] Board members, appointed by the governor, legislature, and participant elections, are held accountable via fiduciary duties under the California Constitution and Education Code, with performance evaluated through governance manuals emphasizing transparency and ethical standards.[47]Finances
Assets and Investment Portfolio
As of September 30, 2025, CalSTRS manages total assets of approximately $382.4 billion, positioning it as the largest educator-only pension fund globally.[65] The portfolio emphasizes long-term value creation through patient capital deployment, focusing on acquiring assets with strong net cash flow potential at reasonable valuations.[66] The portfolio is broadly diversified across nine asset classes to mitigate risk and pursue returns aligned with the system's 7% long-term target.[65] Allocations are managed dynamically within policy-defined target ranges, with public equity forming the largest component.[65] Private equity constitutes a significant portion, with a net asset value of $56.65 billion, reflecting commitments to funds such as those managed by Blackstone and KKR.[65] [67]| Asset Class | Value ($ millions) | Allocation (%) | Policy Target (%) |
|---|---|---|---|
| Public Equity | 162,141 | 42.40 | 39.00 |
| Private Equity | 56,650 | 14.81 | 14.00 |
| Real Estate | 47,671 | 12.47 | 15.00 |
| Fixed Income | 48,671 | 12.73 | 13.00 |
| Risk Mitigating Strategies | 29,065 | 7.60 | 10.00 |
| Inflation Sensitive | 26,741 | 6.99 | 7.00 |
| Cash/Liquidity | 5,896 | 1.54 | 2.00 |
| Collaborative Strategies | 5,167 | 1.35 | 0.00 |
| Strategic Overlay | 428 | 0.11 | 0.00 |
Liabilities, Unfunded Obligations, and Funded Status
The liabilities of the California State Teachers' Retirement System (CalSTRS) primarily consist of the actuarial obligations under its Defined Benefit (DB) Program, which represent the present value of projected future pension benefits owed to members and beneficiaries, calculated using actuarial assumptions including a 7.0% investment return rate.[69] As of June 30, 2024, the DB Program's total actuarial obligation was $380.507 billion, reflecting an increase from $359.741 billion the prior year due to factors such as service cost, interest accrual, and changes in actuarial assumptions.[69] The unfunded actuarial obligation (UAO)—the shortfall between the actuarial obligation and the actuarial value of assets—totaled $88.669 billion for the DB Program as of June 30, 2024, up slightly from $86.586 billion in 2023 despite asset growth from contributions and investment earnings.[69] This UAO stems from historical underfunding, benefit enhancements prior to 2014, and market volatility, though recent strong returns have moderated its growth; for context, assumption changes alone increased the UAO by approximately $17.6 billion in prior valuations.[6] The DB Program's funding plan, enacted in 2014 via Senate Bill 1469, schedules amortization of the UAO through escalating contribution rates, targeting elimination by 2046, with current trajectories indicating achievement ahead of schedule assuming sustained 7.0% returns and no major disruptions.[69] Funded status, measured as the ratio of actuarial assets to actuarial obligations, reached 76.7% for the DB Program as of June 30, 2024—the actuarial value of assets was $291.838 billion—marking the seventh consecutive annual increase from 75.9% in 2023 and 74.4% in 2022.[69] [5] This improvement reflects net investment returns exceeding the assumed rate in recent fiscal years, including 8.5% for fiscal year 2024-25, alongside stable contributions from members (10.25% of creditable compensation), employers (19.1%), and the state (9.828%).[4] In contrast, the Defined Benefit Supplement and Cash Balance Benefit Programs maintain surpluses, with funded ratios exceeding 100% (123.9% and 118%, respectively, as of the same date), as their obligations are fully covered by dedicated assets.[70] [71] Projections indicate the DB funded ratio could surpass 100% before 2046 under baseline assumptions, though sensitivity analyses highlight risks from lower returns or longevity improvements potentially extending amortization timelines.[69]| Fiscal Year End | Funded Ratio (DB Program) | UAO ($ billions) |
|---|---|---|
| June 30, 2022 | 74.4% | Not specified |
| June 30, 2023 | 75.9% | 86.6 |
| June 30, 2024 | 76.7% | 88.7 |
Contribution Rates and Funding Plan
Member contribution rates to the Defined Benefit Program are set by statute at 10.250% of creditable earnings for members eligible for the 2% at 60 benefit formula and 8% for members under the 2% at 62 formula, applicable for fiscal year 2025–26.[73][74] Employer contribution rates, which fund the employer normal cost and a portion of the unfunded actuarial obligation, stand at 19.1% of creditable earnings for the same period, unchanged since July 1, 2021, following Teachers' Retirement Board approval in May 2025 to maintain stability amid improving funded status.[23] The state contributes 10.828% of members' annual earnings to the program for 2025–26, directed toward amortizing its allocated share of the unfunded obligation.[73]| Contributor | Rate (%) | Applies to | Fiscal Year 2025–26 |
|---|---|---|---|
| Members (2% at 60) | 10.250 | Classic formula members | Creditable earnings |
| Members (2% at 62) | 8.000 | PEPRA formula members | Creditable earnings |
| Employers | 19.100 | All active members' earnings | Creditable earnings |
| State | 10.828 | All members' annual earnings | Aggregate basis |
Investment Strategy
Core Investment Policies and Beliefs
CalSTRS's core investment policies are grounded in the "prudent expert" standard, drawing from ERISA prudence guidelines, with the primary objective of maintaining a financially sound retirement system to ensure timely benefit payments to members and beneficiaries.[76] The system's investment philosophy emphasizes long-term patient capital, focusing on acquiring long-term net cash flows and capital gain potential at reasonable prices to achieve a target nominal return of 7.0% annually, or inflation plus 4.25%, while minimizing costs and complying with legal mandates.[2] [77] These policies accept measured risks for commensurate returns, with risk tolerance limits such as no more than 3% exposure to a single security (excluding U.S. Treasuries) and maximum leverage of 10% of net asset value.[77] Underpinning these policies are nine explicit Investment Beliefs, adopted by the Teachers' Retirement Board to guide decision-making in alignment with CalSTRS's fiduciary duties and market views.[78] These beliefs prioritize diversification to enhance risk-adjusted returns, recognizing that broad asset class exposure mitigates volatility; efficiency in global public markets, leading to approximately 80% passive management in those segments while seeking alpha in less efficient areas like private markets; and rigorous cost management to preserve net returns over time.[78] Further beliefs include the value of internal management to leverage CalSTRS's scale and expertise where advantageous; the ability to capture illiquidity premiums through allocations to real estate and private equity for superior long-term yields; and the importance of mitigating short-term drawdowns, particularly given the system's underfunded status, to avoid amplifying contribution burdens during market stress.[78] Responsible corporate governance is viewed as essential for long-term value, incorporating environmental, social, and governance (ESG) considerations and active proxy voting to manage risks and boost returns; alignment of interests with external advisors through transparent fee structures and incentives; and explicit acknowledgment of climate change as a portfolio risk, necessitating strategies for transitioning to a low-carbon economy, including support for carbon pricing mechanisms.[78] These beliefs, reviewed periodically, inform asset allocation, manager selection, and risk oversight, with the latest Investment Policy Statement revisions effective May 7, 2025.[77]Portfolio Allocation and Risk Management
CalSTRS' investment portfolio is strategically allocated across multiple asset classes to pursue long-term growth while incorporating diversification to mitigate volatility. The system's Investment Policy Statement, adopted in January 2024 and updated as of May 2025, establishes long-term policy targets and allowable ranges for these classes, emphasizing economic growth through equities, real assets for inflation protection, and dedicated risk-mitigating and fixed income components for stability.[77]| Asset Class/Strategy | Long-Term Target | Range |
|---|---|---|
| Public Equity | 38% | ±8% |
| Private Equity | 14% | ±5% |
| Real Estate | 15% | ±5% |
| Inflation Sensitive | 7% | ±5% |
| Risk Mitigating Strategies | 10% | ±5% |
| Fixed Income | 14% | ±5% |
| Collaborative Strategies | 0% | 0–5% |
| Cash/Liquidity | 2% | 0–5% |
Historical and Recent Performance
The California State Teachers' Retirement System (CalSTRS) has achieved long-term annualized returns exceeding its 7.0% actuarial investment assumption, reflecting resilience amid market volatility, inflation, and geopolitical tensions. Over 30 years through June 30, 2025, the total fund delivered 7.8%, while 20-year, 10-year, and 5-year annualized returns stood at 7.4%, 8.1%, and 9.4%, respectively.[86] [87] These figures incorporate net returns after fees and have consistently outperformed policy benchmarks over multi-year horizons, supporting the fund's mandate to meet pension obligations for educators.[4]| Period Ending June 30, 2025 | Annualized Net Return |
|---|---|
| 5 Years | 9.4% |
| 10 Years | 8.1% |
| 20 Years | 7.4% |
| 30 Years | 7.8% |