March 19, 2024

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SACRAMENTO, Calif. – Moving to seize market opportunities and maximize returns from the highest performing asset classes, the CalPERS Board of Administration approved a proposal on Monday to raise the portfolio’s investments into the private markets.

CalPERS continues to progress with the private asset strategy begun in 2022. The proposal will increase total private market allocations from 33% of plan assets to 40%. Private equity will increase from a target of 13% of the fund to 17% while private debt will increase from 5% to 8%. The private equity strategy has been successfully achieving its program goals for co-investment and investments in diverse managers while moving away from large buyout.

"Strong and ongoing growth in private equity returns is behind this measured and appropriate increase," said CalPERS Trustee David Miller, chair of the Investment Committee. "Market conditions are evolving, and the investment team needs latitude to deploy capital intelligently to keep the fund on track for sustainable returns."

Board members conducted a lengthy and full session to hear concerns raised about labor practices in some companies where CalPERS is invested.

"The board adopted stringent new labor principles last year, and we will rely on them in our engagement with companies to do the right thing," said CalPERS President Theresa Taylor.

A new CalPERS analysis finds that private equity's 20-year annualized returns stand at 12.3% (PDF), making it the top performing asset class of the fund over that period. The returns from private equity over a five-year and 10-year period also outpaced every other asset class as of the end of 2023. The one-year return for private debt, which was established as a separate asset class in 2022, was 13.3% as of end of 2023.

The CalPERS Investment Office conducted a mid-cycle asset allocation review (PDF) and concluded that private equity remains the asset class with the highest expected long-term total return, which combined with the team’s strong recent deployment has allowed the allocation to increase. The fund's Strategic Asset Allocation targets were last adjusted in 2021.

The most recent (PDF) figures available for the fair value of the CalPERS private equity and private debt asset classes were $68.7 billion and $12.3 billion, respectively. Just last year (PDF), values for private equity and private debt stood at $63.5 billion and $10.9 billion, respectively.

The target allocations for public equity and fixed income will decrease under the new policy. CalPERS' allocation for public equity will go to 37% of the fund and fixed income will be reduced to 28%. The Real Asset target is unchanged.

Although each asset class has a specified target allocation, the policy allows for a given range. For example, private equity's target is now set at 17%, but the range extends by five percentage points in either direction, between 12% to 22% of plan assets.

Fund allocations are evaluated every four years under a process known as Asset Liability Management, with mid-cycle reviews also conducted. The process examines CalPERS' assets and liabilities with an eye toward ensuring the portfolio is well-balanced and capable of meeting future pension costs.

CalPERS' discount rate, comparable to an assumed annual rate of return, will remain at 6.8%. Investment earnings are a crucial source of funding for member pensions. For each dollar spent on pensions, more than half is from returns, underscoring the need for a resilient portfolio.

The next Asset Liability Management review is scheduled for 2025.

Target Asset Allocations: Former and New Target Weights
Asset Classes Prior Strategic Asset Allocation New Strategic Asset Allocation
Public Equity 42% 37%
Private Equity 13% 17%
Fixed Income 30% 28%
Private Debt 5% 8%
Real Assets 15% 15%
Leverage −5% −5%

About CalPERS

For more than nine decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 2 million members in the CalPERS retirement system and administers benefits for more than 1.5 million members and their families in our health program, making us the largest defined-benefit public pension in the U.S. For more information, visit