CalPERS Is Gambling With Your Retirement — And Won’t Show You the Cards

California public employees were promised a pension. What they were not told is that the people managing that pension have quietly moved tens of billions of dollars into investments so opaque that even the fund’s own board members can’t fully see the terms.

CalPERS — the California Public Employees’ Retirement System — holds $563 billion in assets and is the largest public pension fund in the country. It is also only 79% funded. That gap, roughly one dollar in five owed to current and future retirees, is backed by a promise that California taxpayers will make up the difference. That promise has a price tag: $179 billion in unfunded liabilities and climbing.

To close that hole, CalPERS has been doing something that should make every California taxpayer sit up: it has been betting big on private equity and private credit, high-risk, high-fee investment strategies that come with minimal transparency and no guarantee of returns that actually beat a plain index fund. Over the past four years, CalPERS has more than doubled its private equity exposure. Its plan is to push private assets — private equity and private debt combined — to 40% of the entire portfolio.

The fees on these investments are secret. The contracts are not public. When labor advocates and legislators pushed for CalPERS to open its books on private equity holdings, the fund’s staff resisted. When critics asked whether the specialized approaches were actually delivering results, the answer was hard to find — because CalPERS doesn’t make the data easy to find.

Meanwhile, CalPERS CEO Marcie Frost has continued collecting large bonuses even as the fund lags behind other pension systems on investment returns. The fund’s own investment committee has heard repeated warnings that the private equity pivot comes with volatility that could force California employers — cities, counties, school districts — to dramatically increase their contributions if markets turn. Those contributions don’t appear out of thin air. They come out of local budgets. Budgets that also fund roads, fire departments, and schools.

The political dimension makes this harder to discuss honestly. CalPERS and its counterpart CalSTRS, which manages teacher pensions, hold a combined $1 trillion in assets and sit at the center of California’s Democratic political economy. Labor unions have enormous influence over the board. Investment managers who run private equity funds have enormous interest in keeping CalPERS’s money flowing their way. The result is a system where the people asking hard questions about transparency are routinely outvoted, and the people collecting fees have every incentive to keep the arrangement exactly as it is.

California’s pension debt is constitutionally protected, which means it cannot be reduced. If CalPERS misses its investment targets — and the aggressive private equity strategy makes that more likely, not less — the bill goes to taxpayers. Not hypothetically. Automatically.

The fund is not in crisis today. But it is making increasingly risky bets with money it cannot afford to lose, in ways that it refuses to fully disclose, while the people responsible for oversight collect bonuses and the public is told everything is under control.

That is a story California voters deserve to understand before they choose their next governor.

— Jose E. Navarro, The Navarro Report / Human-Directed AI Journalism: Research, analysis, and editorial direction by the author. Drafted in partnership with Claude AI (Anthropic).