CalPERS Rolls The Dice With Half A Trillion Dollars

AENN

Chriss W. Street

MountainTopTimes

Dec 31, 2025

California Public Employee Retirement System just went “all in” with its $556 billion portfolio in a highly speculative strategy called ‘Total Portfolio Approach’ that would allow the fund to invest 75% of assets in equity.

Conservative investment funds have allocated about 40% of investments in fixed income and 60% in equities since the 1980s. That strategy under-performed 100% equity investments by about 1% per year, but avoided the three stock market crashes where stock prices fell by an average of 55%.

CalPERS has a checkered history of adopting dubious investment strategies that have blown up spectacularly. The latest scheme is being led by the pension plan’s Chief Investment Officer Stephen Gilmore, essentially sets up multiple asset-class teams within the pension plan that will compete with each other for cash performance rewards.

According to John Delaney, Chief investment officer at WTW Investments that provides outsourced Chief Investment Officers: “There’s been a view that [traditional strategic asset allocation] benchmarks, while straight-forward and potentially governance friendly, are not necessarily aligned with the markets we have today,”

The good news with TPA is that bureaucratic culture will become more entrepreneurial. The potentially horrible news is that reforms will let bureaucrats use taxpayer money to invest in the types high risk / high return strategies that Wall Street traders use to invest their own money.

TPA proponents claim that the new strategy represents an evolution that draws on the experiences of advanced risk-management technology models employed by sovereign wealth funds, such as Saudi Arabia. But CalPERS is infamous foradopting trendy investment schemes over the last 50 years that have imploded due to conflicts of interest and big time losses:

2005–2016: Federico Buenrostro Bribery and Fraud Scandal

CalPERS Chief Executive Officer Federico R. Buenrostro from approximately 2005 to 2008, accepted over $250,000 in cash bribes, luxury travel, and other benefits from Alfred J.R. Villalobos, a placement agent and former CalPERS board member.

Buenrostro influenced the public pension fund to invest billions in private equity firms represented by Villalobos, including fabricating client letters to facilitate $3 billion in CalPERS sham investment transactions designed to generate fees for Villalobos’s firm.

Buenrostro pleaded guilty to fraud and bribery charges in 2014and was sentenced in 2016 to 54 months in federal prison. Villalobos faced related pay-to-play charges, but just before trial committed in a Reno gun club.

2009–2010: Page Mill Properties Investment Failure

CalPERS invested $100 million in 2009 with Page Mill Properties, a real estate firm that acquired apartment complexes in the very diverse and rent controlled community of East Palo Alto, California.

The investment collapsed amid securities fraud allegations, including an illegal scheme to displace low-income tenants byraise rents aggressively. Investors sued Page Mill for misleading them about the “morally offensive” strategy. CalPERS lost 100% of its investment and was sued in 2010 by local investors about its decision making decision-making process.

2019–2020: Yu Ben Meng Ethics and Conflict-of-Interest Scandal

CalPERS appointed Yu Ben Meng as Chief Investment Officer in 2019. He resigned in August 2020 over allegations of undisclosed conflicts of interest and ties to China’s Thousand Talents Program, a recruitment initiative linked to the Chinese Communist Party. Meng as the highest-paid state employee at the time, failed to disclose personal investments in private equity firms, while making governmental decisions favoring those firms. Meng was also anonymously exposed by an ethics complaint to California’s Fair Political Practices Commission.

The resignation also followed revelations of Meng’s “long and cozy relationship with China,” including his prior role at the State Administration of Foreign Exchange in Beijing. A confidential board meeting on his departure sparked a legal fight, with a former board member alleging violations of open meetings laws. The California Attorney General announced a probe into related investment complaints and foreign influence and transparency in pension management.

2018–2023: Employee Theft from Retirees Funds

CalPERS employee in 2023 was sentenced to six years in prison for stealing about $700,000 from the pension fund through fraudulent benefit payments. The scheme diverted funds intended for pension beneficiaries. This incident highlighted internal vulnerabilities in fund administration.

2007–2025: Clean Energy and Technology Fund Losses

CalPERS invested $465 million to the private equity Clean Energy & Technology Fund in 2007. By March 31, 2025, the fund’s value had declined by $330 million, or -71%, to $138 million. Despite the crash, CalPERS paid $22 million in fees to private equity firm Capital Dynamics.

Assemblyman Carl DeMaio called for a federal criminal investigation, alleging ideology-driven decisions under Governor Gavin Newsom’s administration prioritized “green new deal” initiatives over fiduciary responsibility.

2025: Retiree-Led Forensic Probe

The Retired Public Employees’ Association of California(RPEAC) hired forensic investigator Edward Siedle in 2025 to examine CalPERS amid concerns over underperformance, high fees (over $1 billion annually, including $569 million to private equity managers), and the increased private equity risk exposure (15.6% of the portfolio).The RPEAC complained that the pension fund was only fund’s 75% funded, versus a national average of 83.1% for similar funds. CalPERS average annual returns of 6.6% over five years was also below its “assumed rate of return” 6.8% to pay future benefits on time.

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