The California Public Employees’ Retirement System (CalPERS) posted a 14.8% return for its latest fiscal year, fueled by a stock market rally and strong private equity performance that pushed assets to a record $637.1 billion and improved its funded status to 85%.
In the fund, public equity saw the greatest return with 24.1%, followed by private equity with 17%, private debt with 11%, real assets with 6.3%, and fixed income with 5.9%.
The result comes as the nation’s largest public pension fund moves toward a new “total portfolio approach” designed to give managers more flexibility across public and private markets.
CalPERS is moving away from a traditional asset-allocation model that separates investments into buckets like public equities, fixed income, private equity, and real estate. Instead, the pension giant is adopting a more integrated approach that encourages investment teams to collaborate across portfolios and prioritize overall returns rather than individual asset-class targets.
As part of the overhaul, CalPERS introduced a new benchmark portfolio consisting of 75% stocks and 25% bonds.
Supporters argue the framework gives the pension fund greater flexibility to pursue opportunities across markets. The move represents a significant transformation for CalPERS, making it the first U.S. public pension plan to embrace a total portfolio investment approach, Bloomberg noted.
State legislators are also considering a move that would decrease the retirement age from 57 to 55 for police officers and firefighters in the pension system.
The pension fund, which has 2.4 million members, has drawn criticism from stakeholders, including labor groups and lawmakers, who say it owns stakes in companies that conflict with California’s positions on environmental policy and labor protections. In recent years, critics have pushed the fund to get rid of its investments in major oil producers or companies such as Tesla Inc.
Frost pushed back on those concerns, arguing that the fund’s latest performance demonstrates the value of maintaining exposure to high-performing companies. She said avoiding investments based on outside pressures could limit the returns needed to support the pension system’s members.
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