CalPERS Wants You To Believe "Private Equity Is Important to Your Pension"

Why is the nation's leading public pension misleading unsuspecting pensioners globally about private equity risks and fees?

CalPERS’ public messaging on private equity highlights upside while omitting material risks and costs.

When a leading public pension fiduciary managing hundreds of billions in taxpayer-backed liabilities, such as California Public Employees Retirement System (CalPERS), provides incomplete (at best) and potentially misleading information to the public about its rapidly growing, high-risk private equity investments, it’s dangerous. Consistently unbalanced communications by CalPERS can distort policy, weaken oversight, and—if copied by other plans and retail investors—magnify systemic risk.

By way of example, in September 2025, CalPERS Now: Why Private Equity is Important to Your Pension, the pension presents a strongly positive case for private equity but doesn’t present a complete picture. It emphasizes the upside (historical returns, growth, fees saved via co-investments, and selective transparency) but underplays or omits important risks and critiques. Ironically, if a private equity investment manager had published this same article aimed at the general public, written in a heavily promotional tone, with performance figures, claims of outperformance, and no risk disclosure, it would, in my opinion as a former SEC attorney, raise significant compliance red flags under U.S. federal and state securities laws, SEC advertising and solicitation rules, and fiduciary duty standards for private fund advisers. While CalPERS is not a private equity manager, it should know better. Investors (including other public pensions) who look to the nation’s leading public pension for sophisticated private equity guidance, could be seriously harmed.

If a private equity investment manager had published this same article aimed at the general public, written in a heavily promotional tone, with performance figures, claims of outperformance, and no risk disclosure, it would raise significant compliance red flags.

The pension boasts its “strong” recent investment results were “driven largely by the strength of our private equity investments.” CalPERS had “increased our private equity investments from $50 billion to $92 billion, diversifying the investments to reduce risk, selecting higher-returning investment managers and maintaining a disciplined approach to the asset class.”

These (private equity investments) account for about 60% of our investments since 2022.

Catch a breath: 60% of all investments is a staggering wager for a retirement savings plan.

The high-risk, speculative nature of private equity is not mentioned once.

Indeed, the single reference to risk in the announcement suggests that by almost doubling its private equity exposure to $92 billion, CalPERS, somehow, reduced risk.

Gambling on private equity has strengthened the pension, says CalPERS:

Private equity is just one piece of the puzzle, but it’s an important one. It helps us grow the fund and keep your pension secure for the long term. The results speak for themselves: Private equity has been our strongest-performing asset classes for the last 20 years, delivering billions in profits that help strengthen the pension fund.

Under “What about transparency?” CalPERS incongruously states that private equity’s limited disclosures are somehow consistent with the fund’s commitment to transparency:

We understand that some members have questions about private equity because these companies don’t report as much information publicly as those listed on exchanges. That’s why we’re committed to transparency.

And then:

What we don’t do is detail the individual companies in which the private equity funds have invested, which is exempt from disclosure under California law. Doing so would hurt our competitiveness and make it harder for us to get the best deals for our members.

The profound dangers related to lack of transparency in private equity are not mentioned once.

Instead, CalPERS repeats unsubstantiated, oft-cited industry arguments, including claims that the “best deals” demand secrecy and private equity portfolio holdings are somehow exempt from disclosure under applicable law. In short, says CalPERS, full transparency hurts and secrecy strengthens, pensions.

Private equity secrecy is good for participants since it strengthens pensions, says CalPERS.

In fact, the lack of transparency in private equity creates a range of risks—financial, governance, legal, and reputational—that are especially serious for public fiduciaries managing retirement assets. Private equity’s lack of transparency is far more than a mere inconvenience—it’s a structural risk factor. It conceals true performance, inflates reported success, obscures costs, and undermines fiduciary oversight. For public systems like CalPERS, opacity magnifies political, legal, and reputational vulnerabilities because taxpayers and retirees have a right to know where their money is and how it performs. If valuations later prove inflated, the ensuing losses can damage trust not only in the fund but in public institutions more broadly.

Chart—including typos—from CalPERS.

The exponentially higher-cost related to private equity is not mentioned once.

The article gives superficial treatment to fees, but doesn’t explore how they erode returns. CalPERS fails to mention that private equity fees are astronomically greater (600xs) than traditional public equity investments. Further, since annual fees compound (and fees paid reduce the capital that can compound), even modest extra fees can meaningfully erode long-term returns. The SEC warns investors that “fees aren’t just one‐time deductions—they compound.”

Private equity fees are astronomically (600xs) greater than traditional public equity investments.

In the chart above where CalPERS compares private equity value added vs. fees and profit sharing, total fees disclosed to the public are $1.14 billion on $92 billion in assets, or 124 bps. CalPERS does not disclose that the private equity all-in fees (including, but not limited to, management and performance fees, fund level expenses, portfolio company monitoring and transaction fees, transaction costs and financing expenses, fund of funds or secondary investment fees, and organizational and setup costs) are exponentially greater—often in excess of 6 percent.

Underreporting private equity fees is clearly beneficial to the pension and its investment staff (who often receive bonuses or career advancement tied to reported performance metrics). By keeping total fees understated or fragmented across line items, CalPERS can avoid headlines about “billions paid to Wall Street.”

Private equity managers benefit because large reported fees invite public and legislative backlash. Indeed, the mutual incentive to underreport or obscure fees lies at the center of the transparency and accountability problem in public pension private equity programs. Both sides—public pensions and private equity managers—can benefit, at least in the short term, from downplaying the real costs. Not surprising, the fee disclosure is grossly incomplete and misleading to stakeholders and investors globally.

The mutual incentive to underreport or obscure fees lies at the center of the transparency and accountability problem in public pension private equity programs. Both sides—public pensions and private equity managers—can benefit from downplaying the real costs.

The article is persuasive in its advocacy role and its timing raises serious public policy concerns. It appears that CalPERS is broadly promoting private equity investing—without critical risk disclosures—at the very moment when Wall Street is pushing private equity exposure into more retail or 401(k) settings. Critics are justifiably concerned that average savers do not fully understand the astronomically greater costs and heightened, unique risks (illiquidity, valuation opacity, mismatch of time horizons). In its private equity promotion, CalPERS is potentially hurting retirement savers—especially retail 401(k) investors who are about to be pitched the product for the first time.

CalPERS is broadly promoting private equity investing—without critical risk disclosures—at a time when Wall Street is pushing private equity exposure into more retail or 401(k) settings.

Misinformation about private equity by the nation’s largest public pension is especially troubling at this time.