CalPERS Pushes 17% Private Equity Bet as $179 Billion Liability Shadows Fund
Updated
Updated · CalMatters · May 22
CalPERS Pushes 17% Private Equity Bet as $179 Billion Liability Shadows Fund
1 articles · Updated · CalMatters · May 22
CalPERS is expanding private-market risk under CEO Marcie Frost, with a 17% private equity target and an eventual 8% private credit allocation despite the pension system’s 79% funded status.
The shift follows weak returns and a multibillion-dollar shortfall, but critics say private assets’ manager-set valuations and 3-to-9-month reporting lags can overstate stability and apparent outperformance.
Senate Bill 1319, which would have required private-equity benchmarking and asset disclosure, failed after CalPERS argued greater transparency could cost billions in returns and raise worker contributions.
CalPERS’ private-equity results are also criticized for being measured against private-market benchmarks rather than the S&P 500, while limited partnership agreements and fee terms remain shielded from public view.
With $179 billion in unfunded liabilities, the dispute centers on whether higher-fee private strategies strengthen retirement security or deepen risks for California public workers and taxpayers.
As new federal rules demand more transparency, why is CalPERS increasing its secrecy and high-risk investments?
Will CalPERS' high-fee strategy save pensions or just enrich Wall Street at the public's expense?
In March 2024, CalPERS made a major strategic shift by increasing its investments in private markets, building on an earlier plan from 2021 that had already boosted private equity and introduced private debt allocations. The new move raised private equity from 13% to 17% and private debt from 5% to 8%, aiming to lift total private market exposure from 33% to 40% of assets. This pivot reflects CalPERS’ ongoing effort to achieve higher long-term returns and adapt to changing market conditions, while also rebalancing away from public equity and fixed income to optimize growth potential.