CalPERS posts 11.6% one-year return; board to weigh a "total portfolio" investment approach

CalPERS board representative Yvonne Walker told retirees at a virtual town hall that the system posted an 11.6% one-year investment return, raising its funded status to roughly 79%.

"When we get returns like this, what it means is is that our unfunded liability goes down," Walker said, noting that higher returns can lower employer contribution requirements over time. She said publicly traded stocks returned about 16.8% last year while private equity returned about 14.3%.

The board is reviewing a proposal from Chief Investment Officer Stephen Gilmore to adopt a "total portfolio" approach, which would shift decision-making from separate asset-class silos to a coordinated, portfolio-wide strategy that lets managers select the most attractive investments regardless of category. Walker said the board will consider the proposal at a meeting next week and communicate the outcome via CalPERS' website and email.

Walker emphasized that the board must balance return objectives with an acceptable level of risk. "Our goal still remains to get to a 100% funded," she said. She described the staff effort to create an internal index that would let the board compare the total-portfolio approach's performance against CalPERS' traditional allocations.

The proposal follows a multi-year review of investment strategy; Walker said the board revisits the approach every four years. No formal decision was announced at the town hall; the board's vote is scheduled for its next meeting and members will receive notice of the outcome.

Background: CalPERS' funded ratio and asset returns inform employer contribution rates and the system's long-term ability to meet pension obligations. Any change to investment approach could affect risk exposures and the mix of active versus passive management going forward.