CalPERS previews four-year ALM review, proposes ‘total portfolio’ reference portfolio and Sept.–Nov. timeline

CalPERS officials on a stakeholder webinar described the pension fund’s quadrennial asset–liability management review and outlined a shift toward a “total portfolio” approach, previewing preliminary recommendations to the board in September and final action in November that would take effect July 1, 2026.

The review ‘‘is a process that happens every 4 years,’’ Michelle Nix, chief financial officer of the California Public Employees' Retirement System, said. The ALM process, she said, is board-directed and pairs investment analysis with actuarial measurement to align asset allocation, actuarial assumptions and the discount rate.

The change matters because the decisions that come from the ALM review — including any revision to the discount rate and actuarial assumptions — affect the fund’s reported funded status and employer and employee contribution rates. ‘‘We look at economic and non economic assumptions,’’ Scott Turando, CalPERS chief actuary, said, noting the actuarial office coordinates with investments on the discount-rate recommendation that the board will consider.

CalPERS executives said the investment office and actuarial office are working together through the summer and will present recommendations to two board committees: actuarial items to the Finance and Administration Committee and investment recommendations to the Investment Committee. Nix said the first readings will begin in September and that the board will take final action in November, with changes effective 07/01/2026.

The most notable investment change discussed is a move toward a ‘‘total portfolio’’ decision framework, Steven Gilmore, CalPERS chief investment officer, said. Instead of focusing primarily on asset-class-by-asset-class targets and eleven distinct benchmarks, the total portfolio approach begins with a board-defined risk appetite embodied in a simple reference portfolio — a liquid, off‑the‑shelf mix of equities and bonds managers can easily replicate. Gilmore said CalPERS’ current risk profile is roughly similar to ‘‘70% equities and 30% bonds, approximately,’’ and that the reference portfolio is intended as a transparent baseline for assessing management performance.

‘‘If you think about the whole portfolio, the overall objective, you can end up doing better performance wise,’’ Gilmore said, adding that the fund might plausibly capture 50 to 100 basis points a year of incremental return — and cited a survey of large global asset owners suggesting more than 100 basis points historically for some. Gilmore said management will propose limits on how far it can deviate from the reference portfolio and that the board will re‑test risk appetite indications in September and again in November.

Several participants asked how CalPERS will measure deviation from a liquid reference portfolio when the actual fund contains sizeable private‑market holdings. Gilmore said staff has not finalized a single measurement approach and described options including volatility-based active risk and tracking‑error measures, combined with carefully selected liquid proxies for illiquid assets. He said proxies will be strategy-specific (for example, venture capital would be proxied differently than large‑buyout private equity) and that results should be assessed over longer time windows because private assets revalue less frequently.

Turando said actuarial assumptions remain central to the ALM review: experience studies and funding‑risk analysis test assumptions such as inflation that feed the liability measurement. He reminded listeners that for PEPRA members the total normal cost is split 50% employer / 50% employee, meaning assumption changes can affect employee contribution rates.

CalPERS staff also described governance and stakeholder outreach: additional education sessions with the board are scheduled for June and July, stakeholder webinars will be held in July and December, and staff will post slides and a recording to CalPERS’ ALM web page and YouTube channel. Staff said the presentation slides and recording will be emailed to webinar registrants and that stakeholders may submit follow‑up questions to the CalPERS stakeholder relations mailbox.

No formal board action occurred during the webinar. Staff repeatedly framed the items as proposals and analysis that the board will consider at upcoming meetings.

What’s next: CalPERS will present preliminary reference‑portfolio options and proposed discretion limits to the board in September, test board risk‑appetite indications, and return in November for final readings on recommended actuarial assumptions and investment targets; any approved changes would be effective July 1, 2026.