CalPERS Posts 14.8% Return for Fiscal Year 2025-26, Funded Status Climbs to 85%

The Numbers

CalPERS reported Monday a preliminary net investment return of 14.8% for the fiscal year ending June 30, 2026, according to the pension system's own announcement. That beats last year's 11.6% return and exceeds the fund's assumed rate of return of 6.8%, the benchmark CalPERS needs to hit just to stay on track.

The fund closed the year managing $637.1 billion in assets, up roughly $80 billion from a year earlier, according to CalMatters. Funded status rose from 79% to 85%, meaning CalPERS now holds assets worth 85 cents for every dollar it has promised to pay out to its 2.4 million members.

CEO Marcie Frost called it the fund's best year since 2014, not counting the 2021 post-COVID market snapback, according to CalMatters. Frost credited what she called a disciplined approach in a statement and said the fund will keep resisting distractions that could increase costs or reduce investment returns.

Where the Money Came From

Public equities did the heavy lifting, returning 24.1% as stocks finished the year strong, according to Chief Investment Officer. Private equity returned 17%, private debt 11%, real assets 6.3%, and fixed income 5.9%.

The private equity number is notable because CalPERS overhauled that strategy back in 2022 under Anton Orlich, who was promoted in June 2026 from Managing Investment Director of Private Equity to Deputy Chief Investment Officer for Private Markets. Orlich shifted CalPERS away from large-buyout funds and toward venture, growth, and middle-market deals, along with lower-cost fee structures, according to both CalPERS and Chief Investment Officer's reporting. Returns in that asset class have climbed steadily since.

This month CalPERS also formally rolled out its Total Portfolio Approach, a strategy the board approved in November 2025. CIO Stephen Gilmore, who ran a similar model at the New Zealand Superannuation Fund before joining CalPERS, said the new approach lets the investment team evaluate opportunities based on what helps the whole fund rather than sticking to rigid allocation buckets for each asset class. Gilmore said CalPERS will publicly measure its performance against a simple reference portfolio of 75% global equities and 25% U.S. Treasury bonds going forward, a benchmark meant to keep the active strategy honest.

Why Taxpayers Should Care

This isn't just a Wall Street story. When CalPERS falls short of its target return, the state and local governments that employ CalPERS members have to make up the difference with higher contributions, according to CalMatters. That means more money out of city and county budgets, which ultimately comes from taxpayers.

CalPERS was only 68% funded when Frost took over as CEO in October 2016. Getting to 85% funded is real progress, and it didn't happen by accident. California governments and public employees have been paying more into the system since Jerry Brown's 2012 pension reform law forced the issue.

But 85% funded still means a 15% hole. One good year doesn't erase that math, and CalPERS' own 20-year return sits at 6.81%, barely above its assumed rate, according to Chief Investment Officer. Pension funds live and die by long stretches of performance, not single years, and 2025-26's stock market run won't repeat every year.

The Political Angle

Public safety unions are already using this strong year to lobby lawmakers to roll back parts of Brown's 2012 pension reform and boost retirement benefits for police and firefighters, according to CalMatters. That would be the first such rollback since reform passed.

A single strong year from a volatile stock market is a shaky foundation for permanently richer pension promises. If Sacramento lawmakers use one good year to lock in bigger long-term obligations, taxpayers eat the risk when the next downturn hits, not the unions negotiating the deal.

On the other side, there's a legitimate case that some of CalPERS' private equity bets carry real risk that isn't fully visible to the public. Former CalPERS board members Margaret Brown and J.J. Jelincic, now with the Retired Public Employees Association, pushed a bill this year that would have forced CalPERS to disclose more about its private equity holdings, which often carry high fees and hard-to-verify valuations, according to CalMatters. That bill failed in the Legislature. Their concern is fair: private equity returns look great on paper, but the underlying assets aren't priced daily like public stocks, and outside scrutiny is limited by design. This is a structural transparency question worth tracking, separate from whether this year's 17% private equity return is accurate.

The investment mechanics are clear. What matters going forward is whether the Legislature uses this year's strong returns as cover to loosen the 2012 reforms, and whether CalPERS addresses the unresolved transparency questions around private equity holdings.