Changes at the public pension, which allocates 36.1% of its $634.1bn AUM to private markets as of May 2026, take effect on July 1, replacing its long-standing asset allocation framework
The shift is expected to influence how CalPERS allocates across public and private markets under a single portfolio framework
‘Given our long-term horizon, the contributions coming in, the improvement in our understanding of liquidity, the modeling, and our access to liquidity, we can take a greater exposure to private assets than we have in the past,’ says CalPERS CIO Stephen Gilmore
To be considered in TPA based portfolio, GPs must demonstrate how their funds contribute to portfolio-level risk, diversification, and resilience, according to CAIA
July 1, 2026 (Preqin First Close | Preqin News) – The largest defined-benefit public pension in the US, the California Public Employees’ Retirement System (CalPERS), has joined a growing cohort of institutional investors adopting a total portfolio approach (TPA) to guide investment decision‑making.
The new model will replace its strategic asset allocation (SAA) approach, which has been a core investment management framework for decades.
The TPA model counts some of the largest funds in Singapore, South Korea, Australia, New Zealand, and Canada among its proponents.
The CalPERS Board unanimously voted to adopt TPA at its annual total fund portfolio management program review in November 2025. It said the new framework would ‘increase transparency and give staff more flexibility to capitalize on a variety of market opportunities across asset classes.’
Starting today, July 1, CalPERS will focus on investments that best contribute to the performance of the entire portfolio, rather than looking to achieve individual asset allocation targets.
‘TPA encourages greater collaboration among the investment team, so that their collective wisdom is harnessed to judge investments based on their potential to benefit the entire portfolio,’ said CalPERS CEO Marcie Frost in a press release.
CalPERS will also adopt a reference portfolio recommended by investment advisory firm Wilshire of 75% equities and 25% bonds, which has a long-term expected return of 6.9% and portfolio volatility of 12.7%. The reference portfolio will be used to judge the performance of the portfolio under the TPA model, replacing the 11 benchmarks currently used for each asset class.
The TPA means LPs assess each investment by its contribution to overall portfolio risk and return, rather than managing capital through asset allocation targets and asset class-specific benchmarks. TPA centralizes risk management across a unified portfolio and places greater emphasis on governance, judgment, and coordination across teams, according to the CAIA Association.
This framework contrasts with more traditional approaches such as SAA, where LPs set target allocations across asset classes based on risk tolerance, return objectives, and time constraints. Under SAA, portfolios are rebalanced periodically to ensure these targets remain on track as asset values change.
The BlackRock Investment Institute (BII) published a white paper last month highlighting the growing focus on how a TPA framework is implemented in practice. The paper said asset-class labels should not be the only lens for understanding portfolio risk, because different asset classes can carry similar underlying economic exposures.
An integrated portfolio management approach focuses on how capital is allocated, risk is managed and outcomes are delivered at the total portfolio level, including how incremental changes and new exposures affect risk, liquidity, and overall fund objectives across different economic scenarios.
However, the shift to TPA also increases the analytical and organizational demands placed on investment teams. With decisions evaluated at the total fund level, institutions are increasingly focused on approaches that support cross‑asset visibility, scenario‑based assessment, and coordinated decision-making across their portfolios, rather than relying on asset class‑specific processes. This is driving a greater reliance on technology, risk analytics, and scenario modelling tools to integrate data and inform portfolio‑level decisions.
CAIA found that portfolios managed under a TPA framework outperformed comparable traditional portfolios by around 1.7 percentage points per year over the past decade, highlighting how portfolio‑level assessment can influence long‑term outcomes.
CalPERS’ decision to adopt the TPA model represents a shift in its investment framework that could influence its private market allocations.
‘We do think that given our long-term horizon, the contributions coming in, the improvement in our understanding of liquidity, the modeling, and our access to liquidity, we can take a greater exposure to private assets than we have in the past,’ CIO Stephen Gilmore told the CalPERS board before the vote.
Gilmore assumed the CIO role in April 2024, following a period of leadership turnover. When he was appointed, he was the fourth person to occupy the role in six years. Before his arrival, the pension fund delivered a five-year return of 6.6% under the traditional SAA model, slightly underperforming its benchmark of 6.8%.
Gilmore brought deep experience of the TPA model to CalPERS, having worked with the approach at two sovereign wealth funds – the New Zealand Superannuation Fund and Australia’s Future Fund. Both saw an increase in private market allocations during his tenure.
CalPERS has continued its planned increase in private market allocations, following the board’s March 2024 decision to raise the target from 33% to 40% of the total portfolio. The allocation stood at 36.1% in May 2026, up from 33.8% in February 2025, with private equity at 19.3%, real assets at 12.6%, and private debt at 4.2%, according to its Public Employees' Retirement Fund Monthly Update.
After underperforming its benchmark in four of the past five years, CalPERS delivered a one-year return of 11.6% for the year ending June 2025, exceeding the discount rate (assumed investment rate of return) of 6.8% and the benchmark used to gauge performance by 1.7 percentage points, it said. This lifted its total fund performance over the past five years and ten years to 8% and 7.1%, respectively.
For the year ending June 2025, private equity investments returned 14.3%, private debt returned 12.8%, and real assets 2.7%. Over the same period, public equity investments returned 16.8%.
CalPERS’ adoption of TPA reflects a broader shift towards assessing investments at the portfolio level. Rather than focusing solely on benchmark outperformance, GPs are increasingly expected to show how funds contribute to portfolio-level risk, diversification, and resilience.
A fund manager’s goal should be to act as ‘an extension of the CIO, in helping with the portfolio cohesion story vs. a transactional parts provider,’ says CAIA CEO John L. Bowman in The TPA Roadmap for GPs.
‘CIOs will need help with risk assessment, technology solutions, data sets, thought leadership, and intelligence that assist them in acutely understanding the overall positioning and exposures of the portfolio,’ he adds.
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