The California Public Employees' Retirement System's Investment Committee voted to adopt a Total Portfolio Approach (TPA) to govern investments, including a 75% equity / 25% bond reference portfolio, a formal active risk limit of 400 basis points for non-referenced investments, and no change to the current 6.8% discount rate.

Staff presented the proposal as the second reading of the asset-liability management review and described the TPA as a governance shift intended to simplify benchmarking and improve accountability. Michelle Nicks told the committee the recommendation "is a new investment governance model, a total portfolio approach" and outlined capital market assumptions underlying staff projections.

Chief Investment Officer Stephen Gilmore and the investment team said the 75/25 reference portfolio modestly raises long-term expected returns while increasing volatility relative to the current posture; managers will be expected to operate within an active risk operating range (staff modeled a 250–350 bps operating band, with a 400-bps maximum). Staff emphasized annual and quarterly reporting under the new framework, a three-year projected portfolio updated annually, and multiple work streams (policy, internal governance, treasury and implementation) to support a planned go-live process.

Board members pressed staff on oversight and implementation. President Theresa Taylor and directors asked how annual projected portfolios would be formulated and reported, how liquidity would be managed at the whole-fund level, and how internal culture and compensation systems will align with TPA. Gilmore described a collaborative Total Fund Management Committee that will produce a three‑year projection for board review and said staff expect to add dashboarding and policy revisions to support the change.

The committee debated an amendment proposed by Treasurer Frank Ruffino that would have required staff to present a formal efficacy review of TPA no later than two years after implementation. The amendment failed on a roll-call vote after public comment. Several public callers and organizations testified both for and against the change—some urged a formal review and others cautioned that TPA could concentrate opaque private-market exposure.

After discussion, President Taylor moved adoption of the staff recommendations; the motion was seconded and called. The committee approved the TPA package and directed staff to proceed with stakeholder webinars (a December 4 webinar was announced) and to proceed with the eight work streams identified for implementation. Staff said they would return policy updates to the board (first read in March, second read in June as part of the implementation timeline) and monitor reporting and governance as the approach is rolled out.

The approval formalizes a governance change from a multi‑asset-class strategic asset allocation model toward a single reference portfolio with active‑risk budgeting for the management team. The committee’s action included public assurance that pension payments remain the highest priority and that liquidity frameworks will be maintained; staff described a dashboard metric for available surplus liquidity and a continuing emphasis on maintaining the ability to meet pension obligations.

Next steps: staff will publish stakeholder materials, present policy revisions for board review, finalize dashboards and operational elements of the eight work streams, and continue quarterly reporting under the new framework. The committee also accepted staff direction to provide periodic updates and dialogues with stakeholders as implementation proceeds.