LACERS Fund Performance for Fiscal Year 2005-06

LACERS’ portfolio closed the fiscal year 2005-2006 at $9.3 billion, an increase of $1 billion over the prior fiscal year. The total portfolio earned 12.4% for the fiscal year ending June 30, 2006. The past year’s performance marks LACERS’ fifth consecutive year of ranking in the top quartile of its peer group comparison of public pension funds.

LACERS’ strong performance is largely attributed to its asset mix (asset llocation), which is approved by the Board. Asset allocation plays a pivotal role in determining a portfolio’s performance because it defines the percentage weighting of various types of assets in the portfolio. LACERS’ portfolio is divided among US and non-US stocks and bonds, real estate, and private equity. The asset allocation decision involves consideration of expected returns, volatility, and correlation between asset classes, and is determined in the context of fund liabilities. The asset mix serves to diversify the portfolio and thereby reduces portfolio volatility.

For the past fiscal year, all asset classes within the portfolio posted positive returns, with international equity, real estate, and alternative investments delivering strong returns. Non-US equities returned 28.9%, outperforming its benchmark by 1.0%. Real estate posted a 25.6% return, exceeding the benchmark by 5.4% while alternative investments returned 27.5%, ahead of its benchmark by 13.8%. US equities returned 10.6%, outperforming its policy benchmark by 1.0%. Fixed income returned .1%, outperforming its benchmark by .4%.