Nation’s largest public pension fund plagued by secrecy and underperformance, probe finds

Key Points:

• An independent investigation into CalPERS, the nation’s largest public pension fund with $630 billion in assets and 2.4 million members, found significant concerns including secrecy, chronic underperformance, understated investment costs, and conflicts of interest.
• The report highlighted that CalPERS ranked in the bottom 15% of U.S. public pension funds over 5- and 10-year periods, holds 9% of assets in underperforming "zombie" private equity funds, and pays excessive executive compensation despite poor performance.
• CalPERS executives limited document access to the investigator, raising transparency issues, particularly around private equity and private debt holdings, with the fund opposing legislation aimed at increasing disclosure of these investments.
• Experts and advocacy groups call for independent oversight, such as an inspector general with subpoena power, to investigate potential improper fees and conflicts of interest, noting parallels with other public pension funds that have such oversight after scandals.
• CalPERS CEO Marcie Frost rejected the report’s claims, citing recent improved performance and fee reductions, while the fund’s reliance on investment consultant Wilshire Associates—owned partly by private equity firms linked to CalPERS investments—raises potential conflicts of interest.