The California Public Employees Retirement System (CalPERS) is allocating more funds to fast-growing and early-stage companies in an effort to revamp its private equity portfolio.
The biggest U.S. public pension fund, which has more than $500 billion in assets, expanded its allocation to growth equity by 31% in the fiscal year ending June 2024, a report from CalPERs stated. This is up from 9% two years earlier.
“Growth and venture don’t just have higher returns on average, they also have some diversification from buyout,” Anton Orlich, managing investment director of private equity at CalPERS said in a Bloomberg article.
The pension fund also launched a venture capital program, which accounted for 12% of the fund’s commitments in 2024.
Additionally, CalPERs reduced its allocation to buyout from 91% in fiscal year 2020-21 to 58% in fiscal year 2023-24, data presented to its board showed. The pension fund’s overall private equity allocation rose from 13% to 17%.
The strategy currently accounts for nearly a quarter of capital deployed on a cost basis. Should the current model continue to outperform, the total private equity portfolio will experience “continued improvement” in returns, while the share of invested capital increases, the report added.
CalPERS has seen an increase in performance. Its $98 billion private equity portfolio has returned 14.3% in one year, and 7.4% over three years to June 2025, ranking it first among the 30 largest U.S public pensions.
Key drivers from CalPERs private equity turnaround include ESG integration — incorporating expanded governance and sustainability considerations into due diligence, scaling back or ending commitments that were “not aligning” with CalPERS values on human capital, as well as using lower cost structures, such as separately managed accounts or co-investments to enhance net returns, the presentation stated.
Tom Toth from Wilshire Advisors noted in a September CalPERS Board meeting that while longer returns remain more challenged, they are seeing positive momentum, with private equity remaining “a very strong driver” for total fund returns.
Image via PeopleImages/Shutterstock
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