An independent investigation into the nation\u2019s largest public pension, the California Public Employees\u2019 Retirement System, concluded that its 2.4 million members are imperiled by secrecy, chronic underperformance, understated investment costs and conflicts of interest.<\/p>\n
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The report was commissioned last year<\/a> by a nonprofit advocacy group that includes beneficiaries of the $630 billion fund who were concerned about its lagging performance and lack of transparency. They took the unusual step of hiring their own investigator, a former Securities and Exchange Commission lawyer, after a failed effort to persuade state legislators to order an audit of the fund and to require the creation of an inspector general to oversee it.<\/p>\n Among the report\u2019s key findings<\/a>:<\/p>\n The fund\u2019s returns placed it in the bottom 15% of all 230 U.S. public pension funds for five- and 10-year periods.Some 9% of the pension\u2019s assets are in aging private equity partnerships, known as zombie funds, that are having difficulty selling the companies they have invested in. These funds are \u201cconsuming management fees but producing little or no return for investors.\u201dThe fund\u2019s staffers receive \u201cexcessive compensation\u201d despite its dismal performance. Four executives make more than $1 million a year, another four more than $900,000 and 26 earn between $500,000 and $900,000.<\/p>\n \u201cBetween chronic underperformance, potentially hidden costs and fees, we are extremely concerned by the risks in the fund,\u201d said Margaret Brown, president of the Retired Public Employees Association of California, which funded the report, and a former CalPERS board member. \u201cThis is why we need the Office of the Inspector General, somebody independent with subpoena powers, to get the records to investigate.\u201d<\/p>\n In a statement, Marcie Frost, CalPERS\u2019 chief executive officer, characterized the report as \u201can opinion piece full of baseless assertions and breathless language designed to make our members needlessly fear for the stability of their pensions.\u201d<\/p>\n She added that the fund\u2019s performance has improved in the past two to three years, driven by its private equity holdings, and that fees have been reduced by 35% since 2024.<\/p>\n \u201cFor the past two years, we ranked in the top 5 percent of large U.S. pension funds in terms of performance, and for the past three years we\u2019ve ranked in the top 15 percent,\u201d she said.<\/p>\n Scrutiny of some public pension funds is rising amid concerns about the operations\u2019 secrecy, overly generous valuations of private equity and private credit holdings, and the use of questionable benchmarks to make performance appear better than it is. Public pensions control $6 trillion nationwide, and more than 36 million Americans<\/a> rely on them.<\/p>\n The CalPERS inquiry was conducted by Edward Siedle, a former SEC lawyer and forensic pension investigator at Benchmark Financial Services<\/a> who has examined funds in Ohio, Minnesota and Florida.<\/p>\n CalPERS executives produced \u201climited documents\u201d and refused to provide others requested by Siedle, the report says, leaving him unable to verify how the fund values its opaque private equity and private debt holdings.<\/p>\n In declining the document requests, the report noted CalPERS\u2019 statement: \u201cThe public interest in disclosure is clearly outweighed by the public interest in nondisclosure.\u201d<\/p>\n A CalPERS spokeswoman said it provided Siedle with a link to more than 20,000 pages of documents but he could not access it. The fund then mailed Siedle a DVD on April 29, which he said he received Wednesday and has not been able to review.<\/p>\n CalPERS has argued against public disclosures about its private equity stakes in other circumstances. It recently opposed state legislation that would require more transparency in its private equity stakes, the fund\u2019s documents <\/a>show.<\/p>\n As the fund increases its investments in private equity partnerships, whose terms are complex and confidential, it\u2019s highly unlikely, Siedle\u2019s report said, \u201cthat the pension even knows the full sources, amounts and nature of the fees it pays.\u201d<\/p>\n Siedle said it\u2019s concerning that CalPERS, an investment leader that other investors follow, won\u2019t let beneficiaries see inside the fund.<\/p>\n \u201cPublic pensions are supposed to be the most transparent funds in the world,\u201d Siedle said. \u201cWhen public pension officials say a lack of transparency is beneficial, something is fundamentally wrong.\u201d<\/p>\n Improper fees<\/p>\n Financial experts have long pushed for independent oversight of public pension funds in the U.S. One of them is Rich Wiggins, the former investment risk and operations officer at the Iowa Public Employees\u2019 Retirement System. He suggests the creation of a single independent auditor paid for by the states to monitor all state pensions.<\/p>\n \u201cIt\u2019s so easy to snow people,\u201d Wiggins told NBC News. \u201cThere needs to be an external force that says, \u2018Here is a three-page summary of how this plan did against realistic benchmarks.\u2019\u201d<\/p>\n Pension fund participants would benefit from third-party oversight, Wiggins said, but so would state taxpayers who ultimately back these funds.<\/p>\n Wiggins speaks from experience. A former head of risk and strategy for Saudi Aramco, he joined the Iowa pension system in 2022 and was fired nine months later after he said he flagged inaccuracies in how the pension fund reported its investment risks and management fees and expenses.<\/p>\n Wiggins is suing the state of Iowa, alleging wrongful termination. In April, the judge hearing the case denied Iowa\u2019s motion to dismiss Wiggins\u2019 suit, and it is ongoing.<\/p>\n Rachel Simons, a spokeswoman for the Iowa pension fund, said the fund could not comment on the active litigation.<\/p>\n Other public pensions, including the New York State Common Retirement Fund, have inspectors general monitoring their activities. Independent oversight of the New York fund began in 2008 after a pay-to-play scandal<\/a>.<\/p>\n An inspector general could focus on an array of issues at CalPERS, Siedle\u2019s report said, with most involving the fund\u2019s private equity and private debt holdings. An assessment of all past payments to investment managers could reveal improper fees and expenses, the report says \u2014 a problem that Andrew J. Bowden identified in the private equity industry <\/a>in 2014 when he was the SEC\u2019s director of compliance inspections and examinations.<\/p>\n Siedle\u2019s report also contends that the fund\u2019s longtime investment consultant, Wilshire Associates, poses a conflict to participants in part because it\u2019s owned by private equity firms. CalPERS has relied on Wilshire\u2019s advice on investments for decades as it increased its private equity stakes.<\/p>\n Wilshire is owned by CC Capital Partners and Motive Partners, in which private equity giant Apollo Global Management owns a 24.9% stake. CalPERS has long been an investor in Apollo funds; the pension\u2019s most recent annual report<\/a> shows investments in nine Apollo funds valued at $772 million.<\/p>\n![\"Margaret](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/05\/260521-margaret-brown-mn-1240-6de689.jpg\")
Margaret Brown.Courtesy Margaret Brown<\/p>\n![\"Rich](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/05\/260521-Rich-Wiggins-mn-1240-379df2.jpg\")
Rich Wiggins.Courtesy Rich Wiggins<\/p>\n