The California Public Employees’ Retirement System (CalPERS) for state employees lost 71 percent of a $468 million private equity investment in clean energy.
Because CalPERS pension benefits are only 79 percent funded, California taxpayers and the state government must make up the remaining 21 percent. With a high pension deficit of $180 billion, CalPERS’ private equity investment strategies have come under scrutiny, according to The Center Square:
CalPERS committed $465 million to the private equity CalPERS Clean Energy & Technology Fund (CETF) in 2007. pay for $468,423,814.
Since then, the investment fund’s payouts and remaining investment value have fallen to $138,045,373, as of March 31, 2025.
That’s a loss of 71 percent, or more than $330 million, for which private equity firms received at least $22 million in fees and costs.
For fiscal year 2024-2025, CalPERS’ total return was 11.6 percent, with private equity returns at 14.3 percent and public equity returns at 16.8 percent.
Marc Joffe, a public finance expert and visiting scholar at the California Policy Center, questioned why CalPERS poured a significant amount of money into much riskier and more expensive private equity investments, even though the returns were nearly equal to those of public equity investments.
“The returns were comparable… so why go to all the trouble? If you can get these kinds of returns in the public markets, why bother with all the complexities and illiquidity that comes with private equity?” Joffe told Centrumplein.
Joffe noted that the 71 percent loss in the CETF investment was an example of the “combined dangers of private equity and ESG investing,” where “a very opaque investment choice appears to have been chosen for its green credentials, yet generated a huge loss for taxpayers and retirees.”
Abram Arredondo, spokesman for CalPERS, defended the investment portfolio and blamed the loss of 71 percent on previous management.
“The CalPERS Clean Energy & Technology Fund dates back to 2007, before the pension fund board and staff worked together to tightly focus our private equity strategy,” Arredondo told The Center Square. “Since then, we have diversified our investments to reduce risk, selected the best performing asset managers and reduced fees through co-investments.”
“Since then [2022]we have reduced fees by 10 percent,” continued Arredondo. “The private equity category has been the best performer over the past 20 years and we believe our members deserve access to the revenue-generating opportunities.”
Although CalPERS’ private equity investments appear to have outperformed public equity investments, experts warn that private equity managers earn extraordinarily high compensation that, on top of the risk, can outperform the market.
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