CalPERS Funding Status Drops Amid Negative Returns

Posted on 09/24/2022

The California Public Employees’ Retirement System (CalPERS) saw its funding status drop from 82% down to 71%. This is due to the pension plan’s -6.1% investment return for fiscal year 2022. CalPERS has around US$ 439.8 billion in assets under management. This is CalPERS first annual financial loss in a decade. Public pensions may have to cope with higher U.S. interest rates, which will likely have a negative impact on their public equity holdings, as well as fixed income holdings.

When the Federal Reserve boosted its balance sheet, CalPERS generated a 21.3% return in the prior fiscal year.

The Board of CalPERS adopted a new asset allocation that went into effect on July 1, 2022, that increased private equity allocation by 5% to reach a 13% target and increased real assets by 2% to a total of 15%, added a 5% private credit allocation, and added 5% leverage to the entire portfolio. CalPERS has a new chief investment officer – Nicole Musicco – who recently told the investment committee that CalPERS produced returns that were lower than expected and lower than hypothetical peers.

Keywords: California Public Employees Retirement System.

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