Key Takeaways
- • CalPERS' blended private equity portfolio returned 17.8% in 2025, contributing significantly to the pension fund's total fund return of 15.4%, demonstrating the success of its strategy overhaul launched in late 2022.
- • The turnaround is driven by a generational shift in the portfolio, where newer, outperforming investment vintages are gradually offsetting underperforming legacy holdings accumulated under the previous traditional approach.
- • Anton Orlich, deputy chief investment officer for private markets, has implemented a three-pillar strategy focused on: deep relationships with top-tier managers, emphasis on co-investments, and expansion into growth equity, venture capital, middle-market buyouts, and secondaries.
- • CalPERS formally established a venture program and significantly expanded growth equity exposure under the new strategy, transforming the composition of its private equity segment and increasing the PE target allocation from 13% to 17% of total assets.
- • Private equity now represents 17.9% of CalPERS' total assets, above its 17% policy benchmark and approaching its 22% ceiling, reflecting the strategic reallocation implemented since 2022.
Summary
CalPERS' private equity portfolio delivered a 17.8% return in 2025, marking a significant milestone in the recovery of the nation's largest defined-benefit pension fund's alternative investment strategy. This strong performance helped power CalPERS' total fund to a 15.4% return for the year, demonstrating the tangible benefits of a comprehensive strategic overhaul that began in late 2022. According to Anton Orlich, deputy chief investment officer for private markets, the improving returns reflect a fundamental portfolio composition shift: "Think of it as a tale of two portfolios. There's the older portfolio, built using a traditional approach, and the newer vintages, which reflect our current strategy."
The strategy overhaul was orchestrated by Chief Executive Officer Marcie Frost, who recruited Orlich back to CalPERS after his tenure leading alternative investments at Kaiser Permanente. At the healthcare company, Orlich had developed and implemented an investment methodology adapted for managing liquidity needs tied to annual benefit payments—an approach he has refined and scaled for CalPERS' significantly larger portfolio. Orlich, a Yale graduate with a Ph.D. in political science and military veteran, has established a three-part investment framework centered on forging deep relationships with top-tier, high-conviction managers; emphasizing co-investments; and diversifying into a broader array of strategies beyond traditional leveraged buyouts.
Under the new strategy, CalPERS formally established a venture program and substantially expanded its growth equity exposure, materially transforming the segment mix and performance profile of the private equity allocation. The pension fund raised its private equity target allocation from 13% to 17% of total assets, reflecting confidence in the revised approach. As of the most recent reporting, private equity represents 17.9% of CalPERS' total assets, positioning the allocation above its 17% policy benchmark and within reasonable distance of its 22% ceiling.
The performance recovery marks a notable turnaround for CalPERS, which faced significant underperformance in its private equity holdings prior to the 2022 overhaul. The success of recent vintages demonstrates that the new manager relationships, co-investment activity, and strategic diversification are effectively generating alpha. This trajectory suggests that as older underperforming legacy positions mature and exit the portfolio, blended returns should continue improving, provided new vintage performance remains consistent with recent results.
The strategy overhaul was orchestrated by Chief Executive Officer Marcie Frost, who recruited Orlich back to CalPERS after his tenure leading alternative investments at Kaiser Permanente. At the healthcare company, Orlich had developed and implemented an investment methodology adapted for managing liquidity needs tied to annual benefit payments—an approach he has refined and scaled for CalPERS' significantly larger portfolio. Orlich, a Yale graduate with a Ph.D. in political science and military veteran, has established a three-part investment framework centered on forging deep relationships with top-tier, high-conviction managers; emphasizing co-investments; and diversifying into a broader array of strategies beyond traditional leveraged buyouts.
Under the new strategy, CalPERS formally established a venture program and substantially expanded its growth equity exposure, materially transforming the segment mix and performance profile of the private equity allocation. The pension fund raised its private equity target allocation from 13% to 17% of total assets, reflecting confidence in the revised approach. As of the most recent reporting, private equity represents 17.9% of CalPERS' total assets, positioning the allocation above its 17% policy benchmark and within reasonable distance of its 22% ceiling.
The performance recovery marks a notable turnaround for CalPERS, which faced significant underperformance in its private equity holdings prior to the 2022 overhaul. The success of recent vintages demonstrates that the new manager relationships, co-investment activity, and strategic diversification are effectively generating alpha. This trajectory suggests that as older underperforming legacy positions mature and exit the portfolio, blended returns should continue improving, provided new vintage performance remains consistent with recent results.
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