CalPERS is about to stop doing the one thing pension funds are known for. Starting July 1, there are no more fixed slices for stocks, bonds, and real estate.
CalPERS is the largest public pension fund in the country. It invests for more than 2.4 million teachers, firefighters, and other public workers.
For years it ran on a strategic asset allocation, or SAA. That just means the board set how much money went into each asset class and stuck with it.
Every four years they picked the targets. Then staff filled the buckets and chased a separate goal for each one.
Starting July 1, that's gone. The new "total portfolio approach" judges every investment by one question: does this make the whole fund better?
That shift in asset allocation lets staff move fast when markets change. They no longer have to wait on a target set years earlier.
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The change is the work of Stephen Gilmore, who became chief investment officer in 2024. He ran money the same way at New Zealand's pension fund and Australia's Future Fund.
Gilmore thinks the new setup can add 50 to 60 basis points a year. A basis point is one-hundredth of a percent, so he's aiming for about half a percent more in returns.
On a $600 billion fund, half a percent is real money. It matters even more because CalPERS is only about 80% funded.
Every extra dollar of return takes pressure off workers and taxpayers. He's not pulling the goal from thin air either.
A study of 26 big funds that already use this approach found they beat the old way by 1.3% a year over a decade.
Improving the fund's data and tech sits high on Gilmore's to-do list. Better data, he says, helps the team see how the whole portfolio fits together.
CalPERS is the first big U.S. public pension to go all-in on this, so others are watching closely. If it works they copy it, and if it stumbles the doubters get louder.
To keep score, the fund swapped 11 separate benchmarks for one simple mix of stocks and bonds. That benchmark is set at 75% stocks and 25% bonds.
Its target return, the rate it assumes it can earn, stayed put at 6.8%. CalPERS earned 11.2% last year, so it heads into the change with the wind at its back.
Backers say one scorecard makes it easier to see how well the staff are doing. The board gives up some control, and in return it gets a clearer view of the results.
More than two million members are counting on the new math beating the old.
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