An Investment Plan for Generations

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At CalPERS, our mission is to deliver the benefits that members have earned through their years of public service. To do that, we invest in assets to help grow the fund so we can pay pensions for generations. That’s important because 58 cents of every dollar spent paying benefits comes from what we earn on our investments.

That long-term mission requires long-term vision. The goal is to deliver a 7% risk-adjusted return over the next 10 years. The plan to get us there is two-fold: better assets and more assets.

  • “Better assets” refers to assets with the potential for higher returns and less risk and volatility, which increasingly are rooted in private equity and private credit. We must diversify our assets to include these opportunities.
  • “More assets” means increasing the base of the assets generating returns in the portfolio, specifically through thoughtful, careful leveraging, also known as borrowing. While interest rates are low, we intend to borrow and acquire more assets for higher returns.

Our investment leadership team has been developing this new plan over the past few years. We designed an investing horizon that stretches decades, but the approach can also weather shorter-term market volatility, such as the economic recession caused by COVID-19.

Last year, we redeployed $64 billion in capital to reduce risk, saving $115 million in fees every year going forward by cutting the number of outside money managers we use. Nearly 80% of the fund is now managed more efficiently and at significantly lower costs by CalPERS investment professionals rather than third-party managers.

And, by taking advantage of different investment approaches involving treasuries and public equities, or stocks, we were able to offset $11 billion in losses during the time financial markets were falling sharply in late February through March. The CalPERS investment portfolio is currently valued at more than $390 billion.

Finally, we will fulfill this plan through a total fund approach, which means each asset class, such as fixed income or public stocks, works together to achieve the 7% return target. The total fund collaborative effort allows us to capitalize on our strengths: our fund’s size, our diversification across asset classes, and our ability to concentrate on investing for the long term.

We will take advantage of our strength as an investor, as the largest defined benefit public pension fund in the U.S., to focus on a strategy that will secure our members for many years to come.