Key Takeaways
- • CalPERS has scaled its private equity program from $60 billion to nearly $100 billion over three years, with co-investments representing approximately half of its PE deployment budget in recent fiscal years.
- • The pension fund achieved a 40% co-investment ratio target for the 2023 and 2024 vintage years, a strategic milestone that positions co-investing as central to portfolio performance and benchmark outperformance.
- • CalPERS approved over $600 million in climate solutions co-investments between March 2023 and March 2024, demonstrating commitment to thematic deployment alongside traditional co-investment activity.
- • A successful co-investment program is positioned as critical to CalPERS' ability to access highest-quality assets and beat public market benchmarks, directly impacting the fund's long-term returns and funded ratio trajectory.
- • The fund's recent turnaround—delivering 14% returns over the last fiscal year and improving the funded ratio from the low seventies to the low eighties—is attributed partly to strategic portfolio diversification and enhanced co-investment capabilities.
Summary
CalPERS' strategic focus on co-investment has emerged as a defining element of its private equity program's evolution and long-term success. Over the past three years, the US's largest public pension fund has scaled its PE portfolio from $60 billion to approximately $100 billion, with co-investments now accounting for roughly half of the fund's total private equity deployment budget. This reorientation reflects a deliberate shift toward direct participation opportunities alongside traditional fund commitments.
The pension fund achieved a significant milestone in meeting its 40% co-investment ratio target for the 2023 and 2024 vintage years. This accomplishment underscores CalPERS' commitment to deeper engagement with general partners and enhanced access to premium deal flow. Beyond traditional co-investments, the fund has demonstrated thematic conviction, approving over $600 million in climate solutions co-investments between March 2023 and March 2024—signaling institutional appetite for alignment with sustainability mandates alongside financial returns.
Industry analysis suggests that a well-executed co-investment program serves as a material driver of portfolio alpha. By participating directly in select deals, CalPERS gains the ability to access higher-quality assets and negotiate more favorable terms than fund-level commitments alone would permit, positioning the pension fund to outperform public market equivalents. This capability becomes increasingly important as the fund pursues its broader objective of portfolio diversification and manager alignment.
Recent performance metrics validate this strategic direction. CalPERS delivered a 14% return over the last fiscal year while improving its funded ratio from the low seventies to the low eighties—a trajectory directly supported by the private equity program's turnaround. The fund's leadership has explicitly articulated that enhanced co-investment capability, deeper partnership structures, and increased deployment flexibility are essential components of reaching its $13 billion annual PE deployment target. Looking forward, CalPERS' ability to execute its co-investment strategy will likely prove determinative of whether the fund sustains this momentum through the next decade.
The pension fund achieved a significant milestone in meeting its 40% co-investment ratio target for the 2023 and 2024 vintage years. This accomplishment underscores CalPERS' commitment to deeper engagement with general partners and enhanced access to premium deal flow. Beyond traditional co-investments, the fund has demonstrated thematic conviction, approving over $600 million in climate solutions co-investments between March 2023 and March 2024—signaling institutional appetite for alignment with sustainability mandates alongside financial returns.
Industry analysis suggests that a well-executed co-investment program serves as a material driver of portfolio alpha. By participating directly in select deals, CalPERS gains the ability to access higher-quality assets and negotiate more favorable terms than fund-level commitments alone would permit, positioning the pension fund to outperform public market equivalents. This capability becomes increasingly important as the fund pursues its broader objective of portfolio diversification and manager alignment.
Recent performance metrics validate this strategic direction. CalPERS delivered a 14% return over the last fiscal year while improving its funded ratio from the low seventies to the low eighties—a trajectory directly supported by the private equity program's turnaround. The fund's leadership has explicitly articulated that enhanced co-investment capability, deeper partnership structures, and increased deployment flexibility are essential components of reaching its $13 billion annual PE deployment target. Looking forward, CalPERS' ability to execute its co-investment strategy will likely prove determinative of whether the fund sustains this momentum through the next decade.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.