An independent investigation into the California Public Employees’ Retirement System (CalPERS), the nation’s largest public pension fund with $630 billion in assets, has raised significant concerns about secrecy, chronic underperformance, understated investment costs, and conflicts of interest affecting its 2.4 million members [1]. The report, commissioned by a nonprofit advocacy group representing beneficiaries, found that CalPERS’ returns placed it in the bottom 15% of 230 U.S. public pension funds over five- and ten-year periods [1]. Additionally, approximately 9% of CalPERS’ assets are tied up in aging private equity partnerships, referred to as 'zombie funds,' which are struggling to sell their investments and are 'consuming management fees but producing little or no return for investors' [1].
The report also highlighted executive compensation, noting that four CalPERS executives earn more than $1 million annually, another four earn over $900,000, and 26 receive between $500,000 and $900,000, despite the fund’s underperformance [1]. Margaret Brown, president of the Retired Public Employees Association of California and a former CalPERS board member, expressed deep concern over the risks posed by underperformance and potentially hidden costs, calling for the establishment of an independent Office of the Inspector General with subpoena powers to investigate the fund [1].
In response, CalPERS CEO Marcie Frost dismissed the report as 'an opinion piece full of baseless assertions and breathless language designed to make our members needlessly fear for the stability of their pensions' [1]. Frost asserted that CalPERS’ performance has improved in the past two to three years, driven by private equity holdings, and stated that fees have been reduced by 35% since 2024 [1]. She further claimed that CalPERS ranked in the top 5% of large U.S. pension funds for performance over the past two years and in the top 15% over the past three years [1].
The investigation comes amid broader scrutiny of public pension funds nationwide, particularly regarding transparency, the valuation of private equity and credit holdings, and the use of benchmarks that may overstate performance. Public pensions collectively manage $6 trillion and support more than 36 million Americans [1].
CONCLUSION
The independent probe into CalPERS has intensified scrutiny over its governance, investment performance, and executive compensation. While the report highlights significant risks and calls for greater oversight, CalPERS leadership disputes the findings and points to recent improvements. The controversy underscores ongoing concerns about transparency and accountability in the management of large public pension funds.