Key Takeaways
- • CalPERS, the largest U.S. public pension with $653.8 billion in assets, is exploring a return to hedge fund investing through separately managed accounts (SMAs), 12 years after liquidating its hedge fund portfolio in 2014, according to Pensions & Investments citing records obtained through a public records request.
- • No decision has been made; discussions have been held with Goldman Sachs and Dockside Platforms, with June Kim, CalPERS' deputy chief investment officer for capital markets, reportedly leading the review.
- • The 2014 exit covered investments across 24 hedge funds and six funds of hedge funds, undertaken to reduce portfolio complexity and cost.
- • The SMA structure offers position-level transparency, control over terms and liquidity, and the ability to size exposures without fund-level side letters, addressing fee and opacity objections that led many public plans to exit.
- • Any commitment, and its size, will be closely watched by public plans that followed CalPERS out of the asset class; HFR puts industry assets at about $5.64 trillion at the end of the third quarter.
Summary
The California Public Employees' Retirement System, the largest U.S. public pension fund with $653.8 billion in assets, is exploring a possible return to hedge fund investing through separately managed accounts, according to a Pensions & Investments report citing correspondence obtained through a public records request. The review is at an exploratory stage and no decision has been made.
According to the report, CalPERS has held discussions with Goldman Sachs and Dockside Platforms about obtaining hedge fund exposure through SMAs. Emails exchanged earlier this year show the pension assessing the structure as a way to access diversifying strategies. Goldman highlighted in May the uncorrelated performance of hedge fund managers as a potential rationale for renewed allocations, while Dockside Platforms contacted the pension in February about its exploration of the SMA market. June Kim, CalPERS' deputy chief investment officer for capital markets, is reportedly leading the review.
The effort marks a considerable shift from the fund's posture in 2014, when it liquidated its investments across 24 hedge funds and six funds of hedge funds to reduce portfolio complexity and cost, a move widely cited as one of the most prominent institutional withdrawals from the asset class. Since then, Stephen Gilmore became chief investment officer in 2024, and the fund adopted a total portfolio approach in July 2026 that integrates investment management and risk allocation across asset classes. A CalPERS spokesperson said the fund regularly evaluates opportunities to strengthen diversification and resilience while meeting its target return.
The SMA structure is central to the story. Separately managed accounts give allocators position-level transparency, control over terms and liquidity, and the ability to size and exit exposures without negotiating fund-level side letters. These features address many of the objections large public plans raised a decade ago regarding fees, opacity and complexity, and fit within a total portfolio framework that evaluates each sleeve by its contribution to overall risk.
For hedge fund managers, the exploratory review is a notable signal. The industry has been attracting record capital, with HFR putting total hedge fund assets at about $5.64 trillion at the end of the third quarter. Whether CalPERS commits, and in what amount, will be closely watched by other public plans that followed its lead out of the asset class in 2014.
According to the report, CalPERS has held discussions with Goldman Sachs and Dockside Platforms about obtaining hedge fund exposure through SMAs. Emails exchanged earlier this year show the pension assessing the structure as a way to access diversifying strategies. Goldman highlighted in May the uncorrelated performance of hedge fund managers as a potential rationale for renewed allocations, while Dockside Platforms contacted the pension in February about its exploration of the SMA market. June Kim, CalPERS' deputy chief investment officer for capital markets, is reportedly leading the review.
The effort marks a considerable shift from the fund's posture in 2014, when it liquidated its investments across 24 hedge funds and six funds of hedge funds to reduce portfolio complexity and cost, a move widely cited as one of the most prominent institutional withdrawals from the asset class. Since then, Stephen Gilmore became chief investment officer in 2024, and the fund adopted a total portfolio approach in July 2026 that integrates investment management and risk allocation across asset classes. A CalPERS spokesperson said the fund regularly evaluates opportunities to strengthen diversification and resilience while meeting its target return.
The SMA structure is central to the story. Separately managed accounts give allocators position-level transparency, control over terms and liquidity, and the ability to size and exit exposures without negotiating fund-level side letters. These features address many of the objections large public plans raised a decade ago regarding fees, opacity and complexity, and fit within a total portfolio framework that evaluates each sleeve by its contribution to overall risk.
For hedge fund managers, the exploratory review is a notable signal. The industry has been attracting record capital, with HFR putting total hedge fund assets at about $5.64 trillion at the end of the third quarter. Whether CalPERS commits, and in what amount, will be closely watched by other public plans that followed its lead out of the asset class in 2014.
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