SACRAMENTO (AP) — The nation’s two largest public pension funds on Monday reported double-digit annual returns from rising stock and real estate prices, but cautioned against focusing too much on short-term performance.

The California Public Employees’ Retirement System reported a 12.5 percent annual return while the California State Teachers’ Retirement System announced it gained 13.8 percent for the year that ended June 30. Both had dismal performances last year— CalPERS earned 1 percent and CalSTRS gained 1.8 percent.

CalPERS’ chief investment officer Joe Dear said the fund’s buy-and-hold investment strategy is working.

“When things got rough, we didn’t panic,” Dear said in a statement. “We stuck with our exposure to growth assets and applied the lessons we learned from the past.”

Both funds outperformed their discount rates of 7.5 percent, the projection CalPERS and CalSTRS uses to meet current and future obligations.

Despite the gains, California’s public pensions remain underfunded. CalPERS has an estimated unfunded liability of $100 billion, while CalSTRS reports a funding gap of $70 billion.

“This year reminds us that a pension fund measures its health over the long term and no single year can take us from underfunding to funding adequacy,” said Jack Ehnes, CalSTRS’ chief executive officer, in a statement.

The teachers’ pension fund has been urging Gov. Jerry Brown and state lawmakers to review contribution rates because unlike CalPERS, it lacks the authority to set the contribution rate.

CalSTRS serves 862,000 public school educators and their families and has assets worth $166 billion as of June 30. CalPERS administers a $258 billion system for 1.6 million state and local government workers and their families.

Henry Jones, a CalPERS board member and chairman of its investment committee, also called for looking ahead.

“CalPERS is a long-term investor and we try to not focus too much on one year of performance,” Jones said. “But obviously 12.5 is a great number and we’re pleased with the performance.”

Dear said in a call with reporters Monday that domestic and international stocks at the nation’s largest public pension system returned 19 percent, outperforming its benchmark by nearly 1 percentage point.

Dear said CalPERS’ strong performance suggests that the pension fund is resilient and won’t fail despite concerns from pension critics. The fund’s 20-year investment return is 7.6 percent.

“I think these numbers are convincing evidence that CalPERS has the ability to produce good return on a sustainable basis,” he said.

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