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CalPERS board weighs new four‑year asset‑liability approach, considers total‑portfolio model
Summary
CalPERS board member Yvonne Walker said the board is reviewing a proposed shift in the asset‑liability management process toward a total‑portfolio approach that would give staff more flexibility to optimize returns across the portfolio. The board is holding educational sessions and stakeholder briefings before deciding.
Yvonne Walker, a member of the California Public Employees' Retirement System board, told webinar participants that the board is conducting its once‑every‑four‑years asset‑liability management (ALM) review and is considering a “total portfolio” approach proposed by Chief Investment Officer Stephen Gilmore.
Walker said the ALM process reviews CalPERS' liabilities and the assets needed to meet them and that 2025 is an “especially important year” for the review. She described the total‑portfolio approach as shifting attention away from fixed target weights for individual asset classes and toward managing the portfolio holistically to meet the board’s long‑term return objective. “Under TPA, the board continues to set the ultimate destination and the travel time, but the staff can use a GPS that regularly adjusts the routes, the investments, based on current traffic conditions,” Walker said.
Walker said the approach has worked at other large institutional funds, including the New Zealand Superfund, where Gilmore previously worked, and that evidence shows “annual investment returns under what he calls a total portfolio approach, have consistently outperformed their investment targets.” She added the board is focused on understanding the tradeoffs between risk and return and is holding internal and external educational sessions before making decisions.
Symone Parker of CalPERS' stakeholder relations team opened the webinar and introduced Walker, noting Walker is serving her first term on the board. Walker also announced a new board appointment, saying Gov. Newsom appointed Mike DeToy to represent local governments; Walker thanked departing board member Lisa Middleton for her service.
Walker said the board has begun focused sessions on investment risk and will include consultants, staff and outside experts in its deliberations. She said the board will hold stakeholder educational meetings so members and retirees “come along this path together,” and that the board is taking its time to ensure it fully understands the risks and benefits before changing strategy.
The board provided no timetable for a final decision and did not vote during the webinar. Walker said she expects to share further updates as the ALM process continues.
