The California Public Employees Retirement System Board of Administration voted to adopt a total‑portfolio investment governance model, a 75/25 equity‑to‑bond reference portfolio and a formal active‑risk limit of 400 basis points for portfolio risk outside the reference portfolio, while retaining the fund’s 6.8% discount‑rate assumption. President Theresa Taylor moved the staff recommendation; the board adopted it following discussion and public comment.

Staff framed the change as an evolution in governance and reporting rather than a sudden shift in authority. Michelle Nicks and Stephen Gilmore told directors the total portfolio approach (TPA) gives the board clarity on a reference portfolio and a single limit for active risk; in staff’s presentation they said the reference portfolio “makes it much simpler” to compare overall performance and that “nothing changes to the board’s authority for setting the investment risk and the governance model.” The presentation showed modeling using 300 basis points of active risk for expected returns and used a 75/25 reference as a long‑horizon benchmark for risk and return tradeoffs.

Staff and Wilshire presented the projected tradeoffs: a slightly higher expected return and slightly higher volatility versus more conservative mixes, and an analysis of funded‑status and employer contribution implications over a 10‑year horizon. Staff explained how the TPA will be operationalized through eight workstreams — internal governance, portfolio construction, treasury/ liquidity, policy & controls, communication, reporting, implementation and board action — and proposed an annual three‑year projection cycle that would give asset teams more visibility into expected capital flows.

Directors pressed staff on implementation and guardrails: how annual projected portfolios would be produced, how the board would retain oversight of allocation choices, how liquidity would be managed as private exposures grow, and how compensation and incentives would be aligned. Staff said the investment office will report quarterly on exposures and risk use, will build a dashboard for liquidity and risk metrics, and plans a stakeholder webinar on Dec. 4 to explain employer and member impacts. Amy Deming, project lead for TPA implementation, outlined timelines for policy revisions (first read in March, second read in June) and the project plan aiming for operational readiness in the months after board approval.

The board debated an amendment recommended by Treasurer Ruffino to require a formal comparative review of TPA’s efficacy versus the prior strategic asset allocation model no later than two years after transition. That amendment failed on roll call. The board nevertheless gave committee direction to staff to provide regular updates and to prepare an evaluation/check‑in on progress during the implementation period.

The motion adopted by the board reads, in part: adopt the capital market assumptions underlying the expected return projections; adopt a new investment governance model of a total portfolio approach consisting of a 75/25 reference portfolio and a formal total‑fund active‑risk limit of 400 basis points for non‑reference investments; no change to the current discount rate of 6.8% if adopting the recommended 75/25 reference portfolio.

Next steps: staff will proceed with policy revisions, develop the dashboard and reporting metrics, host the stakeholder webinar on Dec. 4, and continue the eight workstreams toward implementation and a proposed go‑live timetable. The board also received public comment and multiple stakeholder submissions urging stronger guardrails, transparency and periodic evaluation of the new governance model.