CalPERS unveils co-investment strategy promising $25B in fee savings over decade

The CalPERS Board of Administration meeting on June 16, 2025, highlighted the significant advantages of co-investing as a strategy to enhance returns while minimizing costs. Co-investing allows CalPERS to invest directly alongside trusted partners, which eliminates management fees and carried interest typically associated with external fund managers. This approach could potentially save CalPERS approximately $2.5 billion in fees annually, leading to an estimated $25 billion in savings over a decade, thereby benefiting its beneficiaries.

The meeting also reviewed performance comparisons, showing that the current investment strategy is yielding a gross return of 1.25 times, compared to the previous strategy's 1.1 times. This improvement underscores the effectiveness of the new approach.

In addition to financial strategies, the board discussed governance and sustainability initiatives. CalPERS has successfully engaged all active managers to adhere to labor principles and has committed over $6 billion to diverse managers in its non-intermediate portfolio for the fiscal year 2023-2024. This shift towards smaller funds has enhanced diversity within the portfolio, contributing to overall alpha.

CalPERS is also actively involved in sustainable investments, having allocated $1.4 billion to private equity co-investments focused on climate solutions since November 2022. The board emphasized its commitment to expanding the Environmental, Diversity, and Climate Initiative (EDCI), which aims to improve ESG metrics across its investment managers.

Overall, the meeting underscored CalPERS' strategic focus on co-investing, diversity, and sustainability as key components of its investment framework, positioning the organization to achieve better financial outcomes while promoting responsible investment practices.