CalPERS
CalPERS Total Fund policy portfolio (strategic asset allocation 2021, with the 2025 move to a 75/25 Reference Portfolio)
Where it stands today
Our calculation, 1926-07 – 2026-09
Growth of $10,000
Where it came from
CalPERS is the pension system for California public employees and the largest public pension fund in the United States. Its main fund (PERF, Public Employees' Retirement Fund) was valued at about 556 billion dollars on 30 June 2025 according to CalPERS trust-level material, and news coverage in November 2025 quoted about 590 billion dollars. Unlike a model portfolio built by an author, the 'CalPERS portfolio' is a policy decision of a board: every few years the board runs an asset-liability management (ALM) cycle with the actuary, chooses capital market assumptions, an actuarial discount rate and a strategic asset allocation (SAA) that is expected to deliver that discount rate at an acceptable risk of loss.
Before the 2021 cycle, the policy targets in force were (CalPERS trust-level report, March 2022): public equity 50 percent, private equity 8, income (fixed income) 28, real assets 13, with liquidity at about 1 percent and a financing range from minus 6 to plus 3 percent. In the same period CalPERS grouped assets into broad factor-like buckets (growth, income, inflation, liquidity) in its own reporting.
In November 2021 the board completed the ALM review and approved a new SAA. CalPERS reports in its 2022 annual investment report that it kept the discount rate at 6.8 percent (the rate had fallen from 7 percent in July 2021 after strong returns triggered an automatic cut under the Funding Risk Mitigation Policy), added 5 percent leverage for diversification, and accepted an expected volatility of about 12.1 percent. The resulting policy mix, shown in a March 2024 CalPERS staff paper, was: public equity 42 percent (plus or minus 7), private equity 13 (plus or minus 5), fixed income 30 (plus or minus 6), private debt 5 (plus or minus 5), real assets 15 (plus or minus 5) and a leverage of minus 5 percent. CalPERS describes the idea as more liquidity and a more defensive stance in public markets, offset by more private-market exposure.
During fiscal 2023-24 the board carried out a mid-cycle review and, following a staff proposal that relaxed the cap on private equity used in 2021, approved a second mix: public equity 37, private equity 17, fixed income 28, private debt 8, real assets 15, leverage minus 5 (the same documents say total private assets would rise from 33 to 40 percent of the fund and total equity exposure move from 55 to 54 percent). Because private markets cannot be bought quickly, the board set interim targets that move step by step. A CalPERS fact sheet for 2024-25 lists the interim policy weights effective 1 July 2025 as: global equity 40.4, fixed income 29.1, private equity 15.0, real assets 15.0, private debt 3.5 and total fund financing minus 3.0 percent.
On 17 November 2025 the board voted to abandon the strategic asset allocation as its governance tool and adopt a Total Portfolio Approach. Instead of target weights for asset classes with ranges, the board now sets a single Reference Portfolio and an active risk limit. The Reference Portfolio is 75 percent global equity (cap-weighted) and 25 percent US Treasuries (maturity of one year and longer), up from an 'approximately 72/28' starting point. The active-risk limit is 400 basis points of tracking error (the current portfolio runs at about 230, and the expected operating range is 250 to 350). The discount rate stayed at 6.8 percent. CalPERS says the 75/25 reference portfolio balances its long-run risk tolerance with the board's expressed tolerance for more risk when conviction is high. Implementation is targeted for July 2026 and the Chair requested a governance review within two years of implementation. The details of the proposal come from the board paper and the Wilshire attachment; the vote date and fund size come from press coverage and the CalPERS news release.
What is in it
| Public equity (global equity) | 42% | Policy portfolio approved November 2021, range plus or minus 7 points. Earlier policy 50 percent; mid-cycle revision 37; interim target for 1 July 2025: 40.4. Since 1 July 2026 CalPERS measures the total fund against a single 75/25 Reference Portfolio instead of these asset-class targets (see history notes). |
| Private equity | 13% | Range plus or minus 5. Earlier policy 8 percent; revision 17 percent; interim 15.0. |
| Fixed income | 30% | Range plus or minus 6. Earlier policy 28 percent ('income'); revision 28; interim 29.1. |
| Private debt | 5% | Range plus or minus 5. Revision 8 percent; interim 3.5. |
| Real assets (real estate, infrastructure, forestland) | 15% | Range plus or minus 5. Earlier policy 13 percent; same 15 in revision; interim 15.0. |
| Leverage / total fund financing | -5% | Borrowing used mainly to hold more lower-risk assets; revision also minus 5; interim minus 3.0. Weights above plus leverage sum to 100 percent. |
How we model it
| US bond market (aggregate) | 28.6% |
| US large companies (S&P 500) | 24% |
| Real estate (REITs) | 14.2% |
| US small companies | 12.4% |
| Developed markets outside the US | 11% |
| Emerging markets | 5% |
| Corporate bonds | 4.8% |
For a euro investor
How to build it with European funds
| Part | Share | Example funds (ISIN) |
|---|---|---|
| US bond market (aggregate) (closest match) | 28.6% | iShares Core Global Aggregate Bond UCITS ETF EUR Hedged (Acc) IE00BDBRDM35iShares Core Global Aggregate Bond UCITS ETF USD (Dist) IE00B3F81409 |
| US large companies (S&P 500) | 24% | iShares Core S&P 500 UCITS ETF USD (Acc) IE00B5BMR087Vanguard S&P 500 UCITS ETF (USD) Distributing IE00B3XXRP09 |
| Real estate (REITs) | 14.2% | iShares US Property Yield UCITS ETF IE00B1FZSF77iShares Developed Markets Property Yield UCITS ETF IE00B1FZS350 |
| US small companies | 12.4% | SPDR Russell 2000 U.S. Small Cap UCITS ETF IE00BJ38QD84iShares MSCI USA Small Cap ESG Enhanced CTB UCITS ETF USD (Acc) IE00B3VWM098 |
| Developed markets outside the US (closest match) | 11% | iShares Core MSCI Europe UCITS ETF EUR (Acc) IE00B4K48X80iShares Core MSCI Japan IMI UCITS ETF IE00B4L5YX21 |
| Emerging markets | 5% | iShares Core MSCI Emerging Markets IMI UCITS ETF (Acc) IE00BKM4GZ66 |
| Corporate bonds | 4.8% | iShares USD Corporate Bond UCITS ETF (Dist) IE0032895942 |
The idea
A public pension fund needs returns at least equal to its actuarial discount rate (6.8 percent) while keeping the chance of deep losses and employer contribution swings acceptable. CalPERS argues that spreading across public equity, private equity, credit and real assets and using some leverage to hold more safe bonds improves diversification versus a plain stock-bond portfolio. The 2024 staff paper reports that adding new asset classes and then leverage to a simple liquid portfolio reduces estimated drawdown risk step by step, starting from a simple portfolio with a drawdown risk of about minus 37 percent. In 2025 the argument shifts: staff say most of the portfolio can be approximated by a simple stock-bond mix and a single benchmark, and that judging each investment by its contribution to the whole fund adds value (staff target of 50 to 60 basis points of value from the new approach was reported by trade press).
How people buy it
Implemented by CalPERS's internal and external managers across public equity (cap-weighted and factor-weighted mandates), fixed income, private equity, private debt and real assets. There is no retail product. CalPERS's own 2024-25 fact sheet lists asset values: global equity 225.7, fixed income 187.1, private equity 102.9, real assets 74.5, short-term 22.5, private debt 22.0 billion dollars. A private investor can only copy the shape with listed funds: global equity, aggregate bonds, REITs and a small credit sleeve.
Rebalancing as published
Before 2025: policy weights with ranges (equity plus or minus 7, private equity plus or minus 5, fixed income plus or minus 6, real assets plus or minus 5) and periodic ALM reviews with mid-cycle checks (full reviews in November 2021 and 2025, mid-cycle check in 2023-24; the cycle length is our reading of those dates, not a quoted rule). From the Total Portfolio Approach: no asset-class ranges; the fund must stay within a 400 basis point active-risk limit relative to the 75/25 Reference Portfolio, with 250 to 350 basis points expected in normal operation. ALM reviews continue.
Variants
- Policy until mid-2022: public equity 50%, private equity 8%, income 28%, real assets 13%, liquidity 1% (trust-level update, March 2022).
- Policy from November 2021: 42/13/30/5/15 with minus 5% leverage (public equity / private equity / fixed income / private debt / real assets).
- Mid-cycle revision (approved March 2024): 37/17/28/8/15 with minus 5% leverage; interim targets for 1 July 2025: 40.4/15.0/29.1/3.5/15.0 with minus 3.0% financing.
- Adopted 17 November 2025, effective 1 July 2026: Reference Portfolio 75% global equity and 25% US Treasuries (one year and longer) with a 400 basis point total-fund active risk limit; the staff starting point was about 72/28, and 70/30 and 80/20 were also modelled.
Criticism
- Complexity and opacity of private markets: valuations of private equity and real assets lag by about one quarter and smooth reported volatility; CalPERS itself notes the lag in its 2022 return release.
- Trade press (PitchBook, headline 'Calpers' unquantifiable overhaul') and others questioned whether a total portfolio approach can be measured and governed by a board; consultant Wilshire called adoption prudent but 'not without risks'. Northern Trust's Melanie Pickett warned of costly technology and data requirements.
- Raising the reference equity share from about 72 to 75 percent raises expected volatility from 12.0 to 12.7 percent and the worst-case drawdown estimate (global financial crisis scenario) from minus 41 to minus 43 percent, per CalPERS's own comparison, which critics of public-pension risk-taking highlight.
- Use of leverage and increased private-market exposure raise liquidity and cost risks; CalPERS's own paper reports a 30-day liquidity stress test at 1.3 times coverage as of June 2025.
Through the eras
| Era | Dates | Total | Per year | Worst drop | S&P 500 |
|---|---|---|---|---|---|
| Roaring Twenties boom | 1926-07 – 1929-08 | +88.2 % | +22.1 % | −4.5 % | +153.7 % |
| Wall Street crash and Great Contraction | 1929-09 – 1932-07 | −60.1 % | −27.0 % | −68.1 % | −78.2 % |
| New Deal recovery | 1932-08 – 1937-02 | +207.2 % | +27.7 % | −26.1 % | +268.7 % |
| Recession within the Depression | 1937-03 – 1938-03 | −38.4 % | −36.1 % | −39.0 % | −49.5 % |
| Rearmament and World War II | 1938-04 – 1945-09 | +171.0 % | +14.2 % | −17.1 % | +205.8 % |
| Postwar expansion | 1945-10 – 1965-12 | +689.5 % | +10.7 % | −18.4 % | +1212.9 % |
| Golden age of the 1950s | 1950-01 – 1959-12 | +262.4 % | +13.7 % | −10.7 % | +438.8 % |
| Go-go years and nifty-fifty | 1966-01 – 1968-12 | +37.5 % | +11.2 % | −11.5 % | +34.0 % |
| The Great Inflation (stagflation) | 1969-01 – 1982-07 | +128.3 % | +6.3 % | −30.4 % | +84.6 % |
| 1973-74 oil shock and bear market | 1973-01 – 1974-12 | −27.1 % | −14.6 % | −30.3 % | −41.7 % |
| Second oil shock and the Volcker disinflation | 1979-01 – 1982-08 | +56.2 % | +12.9 % | −11.1 % | +59.2 % |
| Great bull market in stocks and bonds | 1982-08 – 1999-12 | +1011.6 % | +14.8 % | −19.6 % | +2060.4 % |
| Black Monday | 1987-08 – 1987-12 | −14.3 % | — | −19.6 % | −21.8 % |
| Savings-and-loan crisis and 1990 recession | 1990-07 – 1991-03 | +6.0 % | — | −11.8 % | +7.4 % |
| 1994 bond market massacre | 1994-02 – 1994-12 | −3.3 % | — | −4.7 % | −3.2 % |
| Asian and Russian financial crises | 1997-07 – 1998-10 | +6.6 % | +4.9 % | −12.3 % | +22.4 % |
| Dot-com bubble and crash | 2000-03 – 2002-10 | −6.7 % | −2.6 % | −11.6 % | −37.2 % |
| Recovery and housing boom | 2002-11 – 2007-09 | +104.7 % | +15.7 % | −4.8 % | +97.0 % |
| Global financial crisis | 2007-10 – 2009-03 | −33.4 % | −23.7 % | −38.3 % | −44.7 % |
| The decade after the crisis | 2009-04 – 2019-12 | +232.8 % | +11.8 % | −12.4 % | +411.2 % |
| Fourth-quarter 2018 sell-off | 2018-09 – 2018-12 | −9.3 % | — | −9.3 % | −14.4 % |
| Covid crash and stimulus boom | 2020-02 – 2021-12 | +30.1 % | +14.7 % | −15.1 % | +53.6 % |
| Inflation shock and rate hikes | 2022-01 – 2022-12 | −17.6 % | −17.6 % | −21.9 % | −19.9 % |
Calendar years
Any N-year period
| Any N-year period | Worst | 10 % worse than | Median | 10 % better than | Best |
|---|---|---|---|---|---|
| 1 y (1192) | −48.6 % | −7.0 % | +11.0 % | +27.1 % | +127.9 % |
| 3 y (1168) | −29.6 % | −0.2 % | +10.2 % | +17.9 % | +37.5 % |
| 5 y (1144) | −12.4 % | +3.2 % | +9.5 % | +15.8 % | +29.3 % |
| 10 y (1084) | −0.5 % | +5.8 % | +9.6 % | +14.1 % | +17.2 % |
| 15 y (1024) | +2.9 % | +6.8 % | +9.6 % | +13.7 % | +16.5 % |
| 20 y (964) | +4.3 % | +7.4 % | +9.9 % | +13.0 % | +14.7 % |
| 30 y (844) | +7.6 % | +8.4 % | +10.3 % | +11.5 % | +13.3 % |
How it behaved in history
- 2017-2022. Policy of 50 percent public equity, 8 private equity, 28 income, 13 real assets (still shown as the policy in a March 2022 trust-level update). In that update the policy portfolio's returns are reported with the plan 'liquidity' and 'financing' lines separately. calpers.ca.gov
- July 2021. Strong fiscal-year returns triggered an automatic reduction of the discount rate from 7.0 to 6.8 percent; the board then kept 6.8 percent in November 2021. counties.org
- Fiscal 2021-22. A year in which both stocks and bonds fell: public equity -13.1, fixed income -14.5 percent, while private equity and real assets returned +21.3 and +24.1 percent (the latter two with a one-quarter lag). www.calpers.ca.gov
- March 2024 (mid-cycle review). The board approved a revised policy: private equity target from 13 to 17 percent, private debt to 8 percent, public equity to 37 and fixed income to 28 percent; real assets 15 and leverage minus 5 unchanged. www.calpers.ca.gov
- 17 November 2025 (effective 1 July 2026). The board replaced the strategic asset allocation with the Total Portfolio Approach: one 75/25 equity/bond Reference Portfolio (global equities and US Treasuries) and a 400 bp active risk limit, with the discount rate kept at 6.8 percent. The reference portfolio replaces the 11 asset-class benchmarks. The consultant's letter gives expected return and volatility of 6.9 and 12.7 percent for the new setup against 6.8 and 12.0 percent for the current portfolio. www.calpers.ca.gov
- Which policy this model uses. This model calculates the November 2021 policy (42/13/30/5/15 with minus 5 leverage), effective 1 July 2022 per trade press, which governed CalPERS from 2022 until mid-2026. Since 1 July 2026 CalPERS is managed against the newer 75/25 Reference Portfolio, which is a two-asset risk benchmark rather than a mix of the fund's holdings, so the 2021-policy results should not be read as the performance of the current benchmark. www.calpers.ca.gov
Published results (by others)
- Total fund return for fiscal 2024-25 versus policy benchmark (1 Jul 2024 - 30 Jun 2025): +11.6 percent versus benchmark +9.9 percent (excess +171 bp, per the trust-level review) www.calpers.ca.gov
- Preliminary return in fiscal 2021-22 (year of negative stocks and bonds) (1 Jul 2021 - 30 Jun 2022): -6.1 percent versus policy benchmark -7.0 percent; public equity -13.1, fixed income -14.5, private equity +21.3, real assets +24.1 percent www.calpers.ca.gov
- Expected return and volatility of the 75/25 Reference Portfolio plus active risk (CalPERS assumptions, not realised) (forward-looking, 2025 analysis): expected return about 6.9 percent, volatility 12.7 percent (current portfolio 6.8 percent and 12.0 percent) www.calpers.ca.gov
- CalPERS asset values by class, 30 June 2025 (30 June 2025): global equity 225.7, fixed income 187.1, private equity 102.9, real assets 74.5, short-term 22.5, private debt 22.0 billion dollars; actual shares 38.9 / 30.3 / 17.7 / 13.1 / 3.8 percent www.calpers.ca.gov
- Expected return and volatility of the proposed 75/25 Reference Portfolio combined with active risk, versus the previous portfolio (consultant's estimates) (as of November 2025 capital market assumptions): 6.9 percent return and 12.7 percent volatility versus 6.8 and 12.0 percent; active risk limit 400 bp versus about 450 bp of combined current policy ranges www.calpers.ca.gov
What we could not verify
- Policy history before 2017 (for example the 2013-2014 and 2017 ALM cycles) was not researched; only the pre-2022 policy from a 2022 report is documented.
- The effective date of the November 2021 policy (1 July 2022) comes from trade press and the file's own earlier description; I did not open the 2021 board paper itself, and the March 2024 approval date is from the CalPERS news release (the exact meeting day is not stated on that page).
- Fund size varies between sources (556.3 billion dollars at 30 June 2025 from trust-level material; 589.5 billion dollars in a trade article for the vote date).
- The 'approximately 72/28' prior portfolio is stated on the November 2025 staff slides as a starting point; how it was constructed is not shown.
- The equity and bond indexes of the Reference Portfolio were still to be recommended by the consultant after the vote; no document confirming the chosen indexes or the actual start of the new approach on 1 July 2026 was found.
- Our regional split of public equity (60/27/12) is an assumption.
Sources
- www.calpers.ca.gov
https://www.calpers.ca.gov/documents/202403-invest-item06a-02-a/download - www.calpers.ca.gov
https://www.calpers.ca.gov/documents/annual-investment-report-fy-2024/download - calpers.ca.gov
https://calpers.ca.gov/docs/board-agendas/202206/invest/item04c-01_a.pdf - www.calpers.ca.gov
https://www.calpers.ca.gov/documents/annual-investment-report-2022/download - counties.org
https://counties.org/csac-bulletin-article/calpers-board-approves-68-discount-rate - www.calpers.ca.gov
https://www.calpers.ca.gov/documents/facts-investments/download?inline= - www.calpers.ca.gov
https://www.calpers.ca.gov/documents/202511-invest-agenda-item05a-01-a/download?inline= - www.calpers.ca.gov
https://www.calpers.ca.gov/documents/202511-invest-agenda-item05a-02-a/download?inline= - www.calpers.ca.gov
https://www.calpers.ca.gov/newsroom/calpers-news/2025/calpers-board-adopts-streamlined-investment-approach-to-seize-market-opportunities - www.calpers.ca.gov
https://www.calpers.ca.gov/newsroom/calpers-news/2025/calpers-announces-preliminary-116-return-for-2024-25-fiscal-year - www.calpers.ca.gov
https://www.calpers.ca.gov/page/newsroom/calpers-news/2022/calpers-preliminary-investment-return-2021-22 - www.ai-cio.com
https://www.ai-cio.com/news/calpers-board-votes-to-approve-total-portfolio-approach/ - pitchbook.com
https://pitchbook.com/news/articles/calpers-unquantifiable-overhaul - www.calpers.ca.gov
https://www.calpers.ca.gov/newsroom/calpers-news/2024/calpers-will-increase-private-markets-investments - www.ai-cio.com
https://www.ai-cio.com/news/calpers-approves-new-asset-allocation-to-guard-against-risk-rising-inflation/
Calculated on historical data. Past results do not predict the future. Models before the 1990s use stand-ins for classes that had no index yet; fees, taxes and fund costs are not included. This is mathematics, not an investment recommendation.