CalPERS retires strategic asset allocation on July 1 — the first US pension to adopt the total portfolio approach. We cover the switch, the staff-pay vote that decides whether it works, the private-credit split it's meant to settle, and the contested outperformance number behind it all. (1) CalPERS deletes the rulebook; (2) the pay vote June 15–17; (3) private credit splits the channel.
Transcript
This is the Universal Asset Owners daily video brief for Wednesday, June tenth. Three things for the people who allocate long-horizon capital.
On July first, CalPERS — nearly six hundred billion dollars, the largest US public pension — retires strategic asset allocation. No more fixed targets for each asset class. One reference portfolio, seventy-five percent equities, twenty-five percent bonds, replaces eleven benchmarks. It's the first US pension to adopt the total portfolio approach.
A model is only as good as its incentives. Next week, June fifteenth to seventeenth, the CalPERS board weighs tying more staff pay to total-fund performance, not individual asset classes. Remove the targets and you concentrate discretion — so the pay packet matters as much as the model.
The case for ditching targets is clearest where the channel can't agree. Washington State, around two hundred billion dollars, is building a standalone private-credit allocation. East Bay Municipal eliminated the asset class entirely in March. Under the new model, that's no longer a fight over a target — it's a fight over contribution.
And here's the catch. The whole case rests on an outperformance number nobody can pin down — somewhere between one point three and two point three percent a year, depending on which study you read. The spread is the story.
Our take: the total portfolio approach trades eleven asset-class alibis for a single number to defend. It buys coherence at the price of nowhere to hide. And the funds it worked for were already the best-governed in the world — which is why CalPERS' real test is the pay packet, not the model.
The full brief, the chart, and The Universal Owner podcast are at universalassetowners dot com. Back tomorrow.
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Produced and edited by the UAO editorial desk. Not investment advice.