The California Public Employees’ Retirement System (CalPERS) for state employees lost 71 percent of a $468 million private equity investment into clean energy.
Because CalPERS pension benefits are only 79 percent funded, the California taxpayer and state government have to make up for the other 21 percent. With a high pension shortfall of $180 billion, CalPERS’ investment strategies into private equity have come under scrutiny, per The Center Square:
CalPERS committed $465 million to the private equity CalPERS Clean Energy & Technology Fund (CETF) in 2007, ultimately paying in $468,423,814.
Since then, the cash out and remaining investment value of the investment fund has declined 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 were paid at least $22 million in fees and costs.
For the 2024-2025 fiscal year, CalPERS’ overall returns stood at 11.6 percent, with private equity returns totaling 14.3 percent and public equity returns totaling 16.8 percent.
Marc Joffe, a public finance expert and visiting fellow at the California Policy Center, questioned why CalPERS has placed a significant amount of money into far riskier and more costly private equity investments when returns were nearly equal to public equity investments.
“Returns were similar … so why go through all the trouble — if you can get these kinds of returns on the public markets, why bother with all the complexities and the illiquidity involved in private equity?” Joffe told The Center Square.
Joffe noted that the 71 percent loss in the CETF investment exemplified the “combined dangers of private equity and ESG investment,” wherein “a very opaque investment choice appears to have been chosen because of its green credentials, and yet it’s now generated a huge loss for taxpayers and retirees.”
Abram Arredondo, spokesman for CalPERS, defended the investment portfolio, blaming the 71 percent loss on prior management.
“The CalPERS Clean Energy & Technology Fund dates back to 2007, before the pension fund’s 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 highest performing asset managers and lowered fees by entering into co-investments.”
“Since that time [2022], we have reduced fees by 10 percent,” continued Arredondo. “The private equity class has been our best performer for the past 20 years and we believe our members deserve access to its income-producing opportunities.”
While CalPERS’ private equity investments appear to have outperformed public equity investments, experts warn that private equity managers earn exceedingly high fees that can outpace the market on top of the risk.
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