The nation’s largest pension fund got a scathing performance review Monday when its new investment chief highlighted the retirement system’s underperforming returns and estimated it missed out on $11 billion in gains during a “lost decade” for private equity.
The unusually candid presentation to board members of the California Public Employees’ Retirement System, known as Calpers, showed returns lagging behind other large pensions in almost every asset class over the past 10 years, with private equity trailing the most, 1.3 percentage points.
““There isn’t one magic answer” to why Calpers underperformed, said chief investment officer Nicole Musicco, who started her job in March. “The biggest impact by far was the 10 years we took a break from participating in private equity.”
The reckoning is coming as Calpers is beginning to deploy billions of dollars in capital, ramping up its commitment to private equity and adding private credit under a new portfolio allocation that took effect in July, a plan that Musicco described as a step in the right direction. Calpers fell short of its target return of 7% annualized under the two previous asset allocations, set in 2014 and 2018.
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