For more than a year, CalPERS has undergone thoughtful research and analysis of new approaches to the private equity portfolio. Private equity has been CalPERS' highest returning asset class over the past 20 years, including a 16.1 percent return in fiscal year 2017-18.

We believe we can increase returns even more by implementing innovative approaches to this important asset class.

Why a New Approach?

Higher Returns

A direct model allows CalPERS to better source and take advantage of investment opportunities in private equity.

Increase Private Equity Share of the Portfolio

As the Fund grows, this model helps CalPERS maintain the target of investing about 10 percent of the total portfolio in private equity.

Address Costs

Over time, the new model enables CalPERS to move away from asset-based fees and keep more money in the Fund.


59 cents of every dollar paid to CalPERS retirees comes from investment earnings, making investments a foundation of the Fund's strength.

The CalPERS Pension Buck: 59 cents comes from CalPERS investment earnings, 28 cents comes from CalPERS employers, and 13 cents comes from CalPERS members

Increasing Returns for the Best-Performing Asset Class

While our private equity investments have performed well, the competition to find and fund high-quality investments is fierce.

The number of publicly listed companies has declined by 50 percent over the past 20 years, while the number of investors seeking private equity deals has rapidly grown.

In order for our private equity asset class to help drive returns, we need to explore new forward-thinking approaches.

Private equity is 8 percent of our investment portfolio

Pie chart demonstrating that private equity represents 8 percent of CalPERS investment asset allocation. The remainder of the asset allocation is 50% global equity, 28% fixed income, 13% real assets, and 1% liquidity.


For over 20 years, private equity has produced the highest fiscal year returns among all the asset classes in our portfolio:

Bar chart demonstrating how private equity performs relative to other CalPERS asset classes over 1, 3, 5, 10, and 20 years.

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What the Models Look Like

The proposed private equity model includes four approaches. This is different from CalPERS' current approach to private equity, which places money with external private equity managers who invest on our behalf.

While the current model has served us well and delivered an average of 10.5 percent over the past 20 years, this new approach will allow CalPERS to stay competitive with other global investors.

Two of these models, CalPERS Direct: Innovation and CalPERS Direct: Horizon, will allow our Fund to directly invest in private companies.


CalPERS private equity models: the current model is composed of Established External Private Equity Managers and Emerging External Private Equity Managers; the proposed model is composed of Emerging Managers, a Partnership Model, CalPERS Direct Innovation, and CalPERS Direct Horizon.
CalPERS Direct is composed of two parts: CalPERS Direct Innovation and CalPERS Direct Horizon. CalPERS Direct Innovation will invest in late stage investments in tech, life sciencesm and healthcare. CalPERS Direct Horizon will invest in long-term investments in core economy established companies.

The Path Forward

We've listened to our stakeholders and they want a healthier funded status and strong returns. Private equity is a critical key to growing the CalPERS Fund over decades.

At the CalPERS Board's direction, the CalPERS Investment Office will continue to explore how these new private equity models can help us achieve those goals. The Board is scheduled to make a decision by year's end on whether to move forward with this new approach.

Graph showing the historical total fund market value from 1988 through 2018. In 1989, the fund was valued at $45.5 billion, and for the fiscal year ending June 30, 2018, the total fund is valued at $351 billion.

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