CalPERS pension fund posts 5.8% gain, helped by stocks and private debt

Fanned-out $100 bills.
CalPERS’ gain leaves the pension fund with $462.8 billion, enough to cover 72% of its future obligations.
(Associated Press)

CalPERS swung to a 5.8% gain in its latest fiscal year as the stock market rally and private debt buoyed the largest traditional public pension fund in the United States.

The preliminary return for fiscal 2023 reported this week is a sharp turnaround for the California Public Employees’ Retirement System, whose 6.1% loss in fiscal 2022 was its worst showing in more than a decade. The gain left CalPERS holding $462.8 billion, enough to cover 72% of its future obligations, unchanged from a year earlier.

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It’s the first full fiscal year since CalPERS ramped up its private equity investments with a $25-billion bet while increasing the use of leverage and allocations to private debt. The results were mixed. Returns for the year that ended June 30 were driven by a 14.1% surge in publicly traded stocks and 6.5% on private debt, as private equity slipped 2.3%, real assets dropped 3.1% and bonds remained flat.


“It really was a tale of two stories,” CalPERS Chief Investment Officer Nicole Musicco said. “The first half of the year we were flat, and then caught up in the second half.”

CalPERS is trying to make up lost ground after being rocked by successive management changes. It has been leaning on alternative assets under Musicco, who was recruited from a Canadian pension fund last year, amid pressure to meet an annual return target of 6.8%. If there’s a shortfall, municipalities across California might have to cut services in order to meet pension obligations.

The preliminary five-year average return now stands at 6.1%, down from 6.7% the previous fiscal year. The 10-year average is 7.1%.

The latest results mirrored a slowdown in private equity markets as higher interest rates ended years of easy deal-making. The loss from private equity for CalPERS followed gains of 3.3% and 44% in preceding years. The fund’s data for private equity, private debt and real assets are reported on a one-quarter lag and were current as of March 31.

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Musicco expects a “downward tail wind” to hurt private equity returns when those numbers are updated, but she remained bullish on the asset class.

“There’s such a huge menu of opportunity within private equity,” Musicco said in a call with reporters.


CalPERS Chief Executive Marcie Frost said the pension fund is maintaining its focus “on meeting the long-term retirement promises made to our members and their families.”

The California State Teachers’ Retirement System, the second-largest U.S. pension fund, has yet to release its fiscal 2023 results. This month CalSTRS Chief Investment Officer Christopher Ailman said he expects an “upper-single-digit kind of year” that falls short of its 7% benchmark.