The California Public Employees’ Retirement System is increasing its investments in private market assets to maximize returns from its highest-performing asset classes.

The pension fund said it’s increasing its private market allocations from 33 per cent to 40 per cent, according to a press release, which noted CalPERS is increasing private equity allocations from 13 per cent to 17 per cent and its private debt allocations from five per cent to eight per cent.

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Its decision to move further into private markets comes after the CalPERS found, over five- and 10-year periods, private equity returns “outpaced every other asset class,” as at Dec. 31, 2023. Notably, its private debt allocations, which it established as a separate asset class in 2022, generated a 13.3 per cent one-year return. In a recent financial disclosure, the pension fund said its private equity and private debt asset classes stood at $68.7 billion and $12.3 billion, respectively, up from $63.5 billion and $10.9 billion, respectively.

Meanwhile, the CalPERS said it will decrease allocations to public equities from 42 per cent to 37 per cent and its fixed income allocations will decrease from 30 per cent to 28 per cent.

“Market conditions are evolving and the investment team needs latitude to deploy capital intelligently to keep the fund on track for sustainable returns,” said David Miller, chair of the CalPERS’ investment committee, in the release.

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