Key Takeaways
- • Pensions & Investments tracked 71 U.S. public pension funds with $1 billion or more in assets and found a median fiscal year 2026 return of 14.3% (fiscal year ended June 30), up from 10.6% the prior year and well above the 7% average assumed rate of return.
- • Public equity exposure drove results: non-U.S. equities returned roughly 27-28% over the 12 months to June 30, the first time in over nine years non-U.S. equities outperformed U.S. equities, according to Meketa Investment Group's Steve Voss.
- • Oklahoma PERS posted the top gain among tracked funds at 19.4%, while CalPERS reported its highest return in years at 14.8% and CalSTRS returned 13.9%.
- • Smaller funds outperformed larger ones (median 14.6% vs. 13.6% for funds over $1 billion, per Callan) because they held more public equities and less private markets exposure.
- • Consultants cautioned against extrapolating past outperformance, recommending trustees focus on 10- and 20-year assumed return targets and full contribution funding.
Summary
U.S. public pension funds posted another strong fiscal year, with equity markets driving results. According to Pensions & Investments, which tracked 71 U.S. public pension funds with at least $1 billion in investable assets, the median return as of Nov. 3 was 14.3% for the fiscal year ended June 30, up from 10.6% the prior year. Every fund in the tracked group posted returns significantly above the 7% average assumed rate of return. Steve Voss, managing principal at Meketa Investment Group, attributed the gains primarily to equity exposure, noting that equities had a banner 12-month period and that non-U.S. equities returned 27% to 28% over the period, outperforming U.S. equities for the first time in over nine years.
Among the largest funds, the $15.5 billion Oklahoma Public Employees Retirement System posted the strongest gain at 19.4%, ahead of its policy portfolio return of 18.8%. Its domestic equity portfolio returned 27.4% gross of fees versus a 24.8% benchmark, while non-U.S. equities returned 25.2%, below a 28.3% policy return. Chief Investment Officer Brad Tillberg credited active large-cap managers and an exceptional small-cap manager. The $19.8 billion Louisiana State Employees' Retirement System returned 18.7%, led by emerging markets, small-cap and domestic equities, according to CIO Bobby Beale. The $4.1 billion Baltimore City Fire & Police Employees' Retirement System posted an 18.3% net return, with international equities returning 32.7% against a 27.6% benchmark; Executive Director Robert Holley cited asset allocation and manager selection. NEPC's Margaret C. Belmondo said plans that stayed fully invested with meaningful non-U.S. equity exposure were generally rewarded, while conservative portfolios with heavier fixed income lagged.
The $637.1 billion California Public Employees' Retirement System reported a 14.8% return, its highest in years and above its 11.6% return in 2025, with public equities returning a preliminary 24.1% and private equity 17%. CalPERS also launched its Total Portfolio Approach in July, measured against a reference portfolio of 75% global equities and 25% U.S. Treasuries. The $417.7 billion California State Teachers' Retirement System returned 13.9% net, versus 8.5% in fiscal 2025, with global equities returning 25.1%, and CIO Scott Chan said the fund remains focused on long-term returns above 7%.
Smaller funds outperformed larger ones, with Callan data showing a median 14.6% return for smaller plans versus 13.6% for funds over $1 billion. Callan's John Jackson attributed this to smaller plans' greater public equity allocations. Wilshire's Tom Toth said private equity returns for larger plans were 9.6%, with top performers around 16% to 17%, and that the opportunity set in private equity continues to grow. Public equities have now delivered strong returns since a 2022 drawdown, with three-year returns in double digits.
Consultants warned against extrapolating these results. Belmondo noted that only a few plans had meaningful SpaceX exposure following its late-June IPO, so that gain did not materially contribute to general outperformance. Toth said investors should watch whether AI-related capital expenditures improve productivity and earnings, as richly valued companies could face pullbacks, and that clients are considering inflation-linked bonds, commodities and real assets for resilience. Belmondo advised trustees to focus on whether funds meet assumed returns over 10 and 20 years and on full contribution funding, concluding that boards should rebalance and stay the course rather than add risk.
Among the largest funds, the $15.5 billion Oklahoma Public Employees Retirement System posted the strongest gain at 19.4%, ahead of its policy portfolio return of 18.8%. Its domestic equity portfolio returned 27.4% gross of fees versus a 24.8% benchmark, while non-U.S. equities returned 25.2%, below a 28.3% policy return. Chief Investment Officer Brad Tillberg credited active large-cap managers and an exceptional small-cap manager. The $19.8 billion Louisiana State Employees' Retirement System returned 18.7%, led by emerging markets, small-cap and domestic equities, according to CIO Bobby Beale. The $4.1 billion Baltimore City Fire & Police Employees' Retirement System posted an 18.3% net return, with international equities returning 32.7% against a 27.6% benchmark; Executive Director Robert Holley cited asset allocation and manager selection. NEPC's Margaret C. Belmondo said plans that stayed fully invested with meaningful non-U.S. equity exposure were generally rewarded, while conservative portfolios with heavier fixed income lagged.
The $637.1 billion California Public Employees' Retirement System reported a 14.8% return, its highest in years and above its 11.6% return in 2025, with public equities returning a preliminary 24.1% and private equity 17%. CalPERS also launched its Total Portfolio Approach in July, measured against a reference portfolio of 75% global equities and 25% U.S. Treasuries. The $417.7 billion California State Teachers' Retirement System returned 13.9% net, versus 8.5% in fiscal 2025, with global equities returning 25.1%, and CIO Scott Chan said the fund remains focused on long-term returns above 7%.
Smaller funds outperformed larger ones, with Callan data showing a median 14.6% return for smaller plans versus 13.6% for funds over $1 billion. Callan's John Jackson attributed this to smaller plans' greater public equity allocations. Wilshire's Tom Toth said private equity returns for larger plans were 9.6%, with top performers around 16% to 17%, and that the opportunity set in private equity continues to grow. Public equities have now delivered strong returns since a 2022 drawdown, with three-year returns in double digits.
Consultants warned against extrapolating these results. Belmondo noted that only a few plans had meaningful SpaceX exposure following its late-June IPO, so that gain did not materially contribute to general outperformance. Toth said investors should watch whether AI-related capital expenditures improve productivity and earnings, as richly valued companies could face pullbacks, and that clients are considering inflation-linked bonds, commodities and real assets for resilience. Belmondo advised trustees to focus on whether funds meet assumed returns over 10 and 20 years and on full contribution funding, concluding that boards should rebalance and stay the course rather than add risk.
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