California Public Employees’ Retirement System (CalPERS) continues to prioritize private equity as a core component of its investment portfolio, even after transitioning to a third-party administrator (TPA) model, according to its CEO. This stance underscores **private equity allocation strategies in public pensions** amid evolving operational structures as of early 2026.
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TPA Transition Maintains PE Focus
CalPERS, managing over $500 billion in assets, shifted to a TPA framework in 2025 to enhance efficiency and reduce internal costs. CEO Marcie Frost emphasized that this change does not diminish private equity’s role, which accounts for approximately 13-15% of the fund’s allocation. Frost noted in recent statements that PE delivers superior risk-adjusted returns critical for meeting the system’s 6.8% target annualized return.
Under the TPA model, CalPERS retains strategic oversight of asset allocation while outsourcing administrative functions. This hybrid approach aligns with trends among large public pensions seeking to optimize **public pension private equity commitments** without sacrificing high-conviction strategies.
Performance Data Supports PE Vitality
| Asset Class | 5-Year Annualized Return (as of Q4 2025) | CalPERS Target Allocation |
|---|---|---|
| Private Equity | 12.4% | 13% |
| Public Equity | 9.2% | 50% |
| Fixed Income | 3.1% | 25% |
| Real Assets | 7.8% | 12% |
CalPERS’ private equity portfolio outperformed public markets over the past five years, driven by buyout funds and growth equity in sectors like technology and healthcare. Bain & Company’s 2026 Global Private Equity Report highlights that pensions with PE allocations above 10% achieved 2-3% higher net returns, validating CalPERS’ commitment.
Industry Implications for PE Fundraising
Large limited partners like CalPERS signal stability for **private equity fundraising trends 2026**, countering dry powder concerns. KKR’s 2025 investor letter projects $2.5 trillion in deployable capital, with public pensions contributing 20% of commitments. McKinsey analysis notes TPA adoption could accelerate PE deployments by streamlining due diligence.
Regulatory scrutiny remains, particularly on fees and ESG integration. CalPERS mandates net-zero alignment in new PE commitments, influencing **ESG private equity strategies in institutional portfolios**. Kirkland & Ellis partners advise that TPA models mitigate fiduciary risks while preserving alpha generation.
Historical Context and Outlook
- 2018-2022: CalPERS ramped PE to 13% amid low interest rates, posting 14.5% vintage returns.
- 2023-2025: TPA pilot reduced ops costs by 15%, freeing capital for illiquids.
- 2026 Outlook: Frost targets 17% PE exposure by 2030, focusing on secondaries for liquidity.
Goldman Sachs forecasts **public pension TPA adoption in private equity** will rise to 40% by 2028, bolstering deal flow in a high-rate environment. CalPERS’ reaffirmation positions it as a bellwether for institutional PE strategies.
Sources
https://www.remoterocketship.com/company/vaticahealth/jobs/program-manager-partnerships-united-states-remote/
