Calpers is expanding its private equity portfolio following its strongest fiscal year since 2021, reporting an 11.6% return and reaching $556.2bn in total assets under management, according to a report by the Financial Times.

The US’s largest public pension fund has increased its target allocation to private equity from 13% to 17%, with the asset class now accounting for nearly 18% of its portfolio. Private equity returned 14.3% for the year, up from 10.9% in the prior period, and rebounding from a loss the year before.

Chief investment officer Stephen Gilmore said the fund’s scale and long-term horizon make it an attractive partner for top-tier private equity firms. Calpers has also increased its use of co-investments, which typically avoid management fees and carried interest, and has reduced overall private equity fees by 10% since overhauling its strategy in 2022.

Public equity, which represents 39% of the portfolio, was the best-performing asset class with a 16.8% return.

Despite continued optimism from Calpers leadership, some former board members have expressed concern over the risks associated with private equity exposure. Margaret Brown, now president of the Retired Public Employees’ Association of California, warned that increasing allocations to private equity represents “far too much risk for a public pension fund that millions of retirees depend on.”

Nonetheless, Calpers chief executive Marcie Frost reaffirmed the fund’s belief in private equity, calling it “an asset class we have conviction in” and one that should deliver superior returns for members over the long term.

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