CalPERS, the massive pension fund that covers retirement benefits for millions of California public employees, just closed out one of its strongest years in recent memory — welcome news for the state, local governments and, ultimately, taxpayers across the Inland Empire and beyond.
The California Public Employees’ Retirement System reported Monday that its investment portfolio grew 14.8% during the 2025-26 fiscal year, more than doubling the fund’s target return of 6.8%. It marks the second year in a row that CalPERS has posted double-digit gains, fueled largely by a strong stock market.
CalPERS CEO Marcie Frost called it the fund’s best performance since 2014, not counting 2021’s market rebound following the pandemic crash. In a statement, she credited the fund’s investment team for staying the course through market swings.
“Our team has maintained a disciplined approach to building the health of the pension system, and our improved funded status shows this effort is paying off for our 2.4 million members,” Frost said.
The fund ended the fiscal year with total assets of roughly $637.1 billion, an increase of about $80 billion from the previous year.
For local governments, school districts and other public agencies throughout Southern California, CalPERS’ investment performance carries real financial weight. When the fund falls short of its targets, those agencies — and by extension, taxpayers — are required to contribute more money to make up the difference. Strong years like this one ease that burden.
CalPERS remains what’s known as underfunded, meaning its assets don’t fully cover everything it owes to current and future retirees. As of this year, the fund’s assets equal about 85% of its total obligations. That’s a marked improvement from a decade ago, when CalPERS was funded at only about 68% in the aftermath of the Great Recession. Since then, a series of reforms have required both public agencies and employees to contribute more toward pension costs.
The strong earnings report lands at a politically sensitive moment. Public safety unions representing police officers and firefighters are pushing state lawmakers to expand retirement benefits for the first time since 2012, when then-Gov. Jerry Brown signed legislation scaling back pension perks amid the state’s fiscal troubles. A robust investment year could give legislators more confidence to revisit those limits.
Still, not everyone is convinced CalPERS is performing as well as it could. Critics — including some candidates who ran unsuccessfully for seats on the CalPERS board last year — argue the fund’s investment strategy is overly complicated and could be delivering stronger returns with a simpler approach.
Among the most vocal critics are former CalPERS board members Margaret Brown and J.J. Jelincic, now affiliated with the Retired Public Employees Association. They’ve raised concerns about the fund’s growing reliance on private equity investments, which often come with steep fees and less transparency about their true value. Both backed a state bill this year that would have required CalPERS to disclose more details about those investments, though the measure ultimately failed.
“These are very good results, however you need to think about how you got there,” Jelincic told the board. “You expanded high risk private equity and you moved into higher risk segments within that asset class.”
Fund leadership has defended the strategy. Last year, the CalPERS board approved a new approach that gives Chief Investment Officer Stephen Gillmore greater flexibility to shift investments quickly across the entire portfolio, rather than being confined to specific categories like real estate or private equity. Under the policy, CalPERS aims to keep about 75% of its holdings in stocks and 25% in bonds.
Frost and Gillmore have both said private equity remains a key piece of the fund’s long-term strategy. CalPERS formally opposed the transparency bill, arguing it could cost the fund billions of dollars in missed investment opportunities.
“Investing in the private markets gives us potential to earn higher returns while spreading our risk from the often volatile public stock market,” Frost told the board.
For the year, CalPERS’ private equity holdings returned 17%, while its stock investments gained 24% — outpacing the S&P 500, which rose 21% over the same period.
Original source: CalMatters
