The California Public Employees’ Retirement System announced Monday its Public Employees’ Retirement Fund achieved an 11.6% return in fiscal 2025, the one-year period ending June 30, outperforming the fund’s 6.8% assumed rate of return. In fiscal 2024, the fund returned 9.3%.
The U.S.’s largest pension fund managed approximately $556.2 billion as of the end of June. The fund reported double-digit returns among its public equity, private equity and private debt portfolios, although the valuations of the latter two were reported on a one-quarter lag.
The fund’s public equity holdings returned 16.8%, while private equity and private credit returned 14.3% and 12.8%, respectively. Fixed income returned 6.5%, and real assets returned 2.7%.
In 2024, CalPERS approved a new target allocation of up to 40% to private assets, an increase from 33%, at the expense of fixed income and public equities. The fund attributed strong private equity returns to co-investments; in 2022, the fund began to diversify its private equity portfolio.
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In fiscal 2021, buyouts made up around 91% of CalPERS’ private equity portfolio, but more recently, they accounted for 67.4% as of the first quarter of 2024. The fund aimed to reduce its investments with large buyout managers and invest in smaller and middle-market firms with a more specialist focus, according to board meeting minutes.
CalPERS noted in its announcement that the strategy allowed for a 10% cut in management fees and that “the private equity portfolio ranked as the best performing of its peers for calendar year 2024.”
Over the past five, 10, 20 and 30 years, CalPERS returned an annualized 8%, 7.1%, 6.7% and 7.6%, respectively. The funded status of the PERF also increased to 79% as of June 30, up from 75% at the end of fiscal 2024.
“Despite some market headwinds earlier in the year, our investment strategy paid off,” said CalPERS CIO Stephen Gilmore, who started his position in July 2024, at the beginning of the fiscal year, in a statement. “The team remains poised to take advantage of investment opportunities as they develop and to strike the best possible deals to boost returns and cut costs for the fund.”
CalPERS manages retirement benefits for 2 million beneficiaries.
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Tags: California, California Public Employees’ Retirement System, CalPERS
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