California’s largest pension system reported Monday strong annual returns over the last 12 months, surpassing the fund’s internal benchmark by 1.7%, despite recent market volatility.

California Public Employees Retirement System annual investment returns showed the fund’s value stood at $556 billion as of June 30, the end of California’s fiscal year.

CalPERS’ reported a preliminary return of 11.6% in the past year, which exceeded the fund’s discount rate of 6.8%, which indicates the level of returns needed for the pension fund to meet its obligations.

“Despite some market headwinds earlier in the year, our investment strategy paid off,” Chief Investment Officer Stephen Gilmore said in a statement. “The team remains poised to take advantage of investment opportunities as they develop and to strike the best possible deals to boost returns and cut costs for the fund.”

Gilmore is relatively new to the position, having started as the chief investment officer last summer.

There has been considerable uncertainty among investors during the first six months of President Donald Trump’s second term. Sudden changes to tax reform and tariffs have led to volatility in the stock market.

It’s important to look at returns over long periods of time, said Keith Brainard, the research director for the National Association of State Retirement Administrators.

“Investment activity is a marathon,” Brainard said, “not a sprint.”

He said longer-term investment performance indicates, in part, what direction the funding level of a pension system is moving. The fund reported an 8% return on investments over a five-year period, ending June 30, which is higher than CalPERS’ return assumption.

The retirement system’s funding level appears to be following that trend. CalPERS reported on Monday having 79% of the money to cover its financial obligations — an increase in the pension’s funding level which stood at 75% in 2024.

“In just two years, our investment returns have helped CalPERS increase the funded status to nearly 80% and rebound from the economic effects of the pandemic,” CalPERS CEO Marcie Frost said in a statement.

The system’s best performing asset class, public equity investments, provided a return of 16.8%. Nearly two fifths of CalPERS’ investments are in publicly traded assets.

Brainard also noted that CalPERS’ massive size — over half-a-trillion dollars — makes it difficult for the pension fund to be nimble.

“It’s like moving in a big aircraft carrier,” he said. “If you’re turning a little bit, it takes a while.”

Because of this, CalPERS, and other large pension systems, are often looking for opportunities to get an edge in different facets of their asset allocation, Brainard said. One of those strategies is private equity investments.

The fund reported that private equity assets provided a 14.3% return as of March 31, when the latest returns were available.

Those investments have created concern in recent years for some stakeholders. The Retired Public Employees Association of California launched a crowdfunding effort to finance an independent investigation into CalPERS’ private equity investment, among other concerns, last month.

The group has taken issue with CalPERS’ level of private equity investments, which are riskier and less transparent than publicly traded companies and other investments, the group’s president said. Both the retiree group and the financial investigator have made attempts to audit the retirement system in the past.