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The California Public Employees\u2019 Retirement System, or CalPERS, headquarters buildings in downtown Sacramento as seen on Sept. 16, 2021.<\/p>\n
Xavier Mascare\u00f1as<\/p>\n
Sacramento Bee file<\/p>\n
An independent forensic investigator hired by a group of retired state employees alleged California\u2019s largest pension fund has systemic \u201cgovernance failures,\u201d which has resulted in a retirement system underfunded by hundreds of billions of dollars.<\/p>\n
In a 255-page report<\/a>, longtime pension writer and financial investigator Ted Siedle accused the California Public Employees\u2019 Retirement System of misrepresenting the amount paid to Wall Street managers and withholding records about the fund\u2019s investments.<\/p>\n The investigation was commissioned by the Retired Public Employees Association of California, leaders of which have frequently called for more oversight of CalPERS. Siedle\u2019s report advised the state to establish an inspector general to oversee the massive pension fund.<\/p>\n Siedle has produced similar reports in other states and has maintained that public pensions\u2019 increased reliance on private equity investments has coincided with a lack of transparency. In the case of CalPERS, those investments are hiding underperformance of the portfolio\u2019s investments, he stated.<\/p>\n \u201cThese funds are not being run to produce sole and exclusive benefits for their participants, they\u2019re being run to satisfy a lot of people\u2019s objectives, including elected officials, Wall Street people and private interest groups,\u201d he said.<\/p>\n CalPERS CEO Marcie Frost strongly pushed back against the report.<\/p>\n \u201cThis report is not based on fact,\u201d she said in a statement. \u201cIt is an 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 Frost noted that since 2016, the retirement system\u2019s funded status has steadily increased, and by the end of 2025 CalPERS had 84% of the money to cover its financial obligations. She added that in recent years the massive pension fund has ranked in the top 5% of large pension funds in the country in terms of performance. Much of that success has been driven by the fund\u2019s private equity portfolio, Frost noted.<\/p>\n Siedle has a different assessment. CalPERS\u2019 underfunded status is a result of investments in non-public assets, and particularly because the fund pays excessive fees to external managers, his report claims.<\/p>\n Frost pointed out that CalPERS has worked to decrease those fees by 35% since 2024 through targeted private equity investments and co-investments.<\/p>\n Report recommends inspector general<\/p>\n Because CalPERS\u2019 board of administration is not comprised of investment experts, Siedle recommended that California establish an inspector general\u2019s office to oversee the $625 billion fund. The retiree group that paid for Siedle\u2019s work has previously introduced legislation to create an inspector general for CalPERS, which has failed to pass.<\/p>\n \u201cHaving an inspector general look at this and produce a report on these elements, wouldn\u2019t that be a good idea?\u201d Siedle asked.<\/p>\n Margaret Brown, RPEA\u2019s president, said that an inspector general would provide necessary oversight that she feels is currently lacking from the board of administration.<\/p>\n \u201cThey\u2019ve delegated almost all the decisions to the staff, and they don\u2019t ask any questions,\u201d Brown said of CalPERS\u2019 board.<\/p>\n Brown pointed to the resignation of CalPERS\u2019 chief investment officer, Yu Ben Meng, in 2020 over allegations that he had approved a $1 billion deal<\/a> with a firm in which he\u2019s a shareholder as evidence that more oversight is needed.<\/p>\n \u201cThat never would have happened if there was an independent inspector general inside CalPERS\u2019 offices,\u201d she said.<\/p>\n Frost maintained that CalPERS is one of the most transparent retirement systems in the country and, as required by California law, the fund reports fees and fund performance to the public and the Legislature. She noted that private equity performance is reported after all fees have been subtracted.<\/p>\n A campaign for transparency<\/p>\n According to the online campaign<\/a>, RPEA has raised over $245,000 from 350 donations for the investigation. The majority of that sum was contributed by the organization.<\/p>\n The report was part of a broader campaign to scrutinize CalPERS\u2019 private equity investments. Last week, the Senate Appropriations Committee effectively killed a bill<\/a> that would have required private equity firms with partnerships to California public pension funds to report their assets\u2019 identity, location and the number of workers employed at those companies. RPEA and labor groups were supportive of that bill, but local government groups and CalPERS\u2019 staff opposed.<\/p>\n Earlier this week, RPEA hosted a screening of a documentary about the growth of private equity in public pensions that featured Brown and other former CalPERS board members who alleged they were pushed out of their positions after raising concerns about these alternative investments.<\/p>\n In the report, Siedle notes that he has \u201cpublicly invited the FBI, SEC and any CalPERS whistleblowers to assist\u201d with the investigation. He declined to elaborate when asked whether he had been in further contact with law enforcement authorities.<\/p>\n Related Stories from Sacramento Bee<\/p>\n
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