Investigation Reveals Systemic Issues at CalPERS: Secrecy, Underperformance, and Conflicts of Interest
An independent investigation into the California Public Employees’ Retirement System (CalPERS) has uncovered a pattern of secrecy, chronic underperformance, understated investment costs, and conflicts of interest, according to a report commissioned by the Retired Public Employees Association of California. The report, authored by former SEC lawyer Edward Siedle, was released after the group failed to persuade state legislators to order an audit.
"The fund suffers from secrecy, chronic underperformance, understated investment costs, and conflicts of interest."
Key Findings
-
Poor Performance: CalPERS returns placed it in the bottom 15% of 230 U.S. public pension funds over five- and ten-year periods.
-
Zombie Funds: Approximately 9% of assets are tied up in aging private equity partnerships, known as "zombie funds." These are difficult to exit, generate low returns, and continue to consume management fees.
-
Excessive Compensation: Staff compensation is described as excessive. Four executives earn over $1 million annually, four earn over $900,000, and 26 employees earn between $500,000 and $900,000.
Responses from Stakeholders
Margaret Brown, president of the Retired Public Employees Association, expressed concern over the risks identified and reiterated the need for an independent inspector general with subpoena powers to oversee the fund.
In response, CalPERS CEO Marcie Frost dismissed the report, calling it "an opinion piece full of baseless assertions." She pointed to improved recent performance—noting CalPERS ranked in the top 5% of large U.S. pension funds over two years—and a 35% reduction in fees since 2024.
Investigation Methodology
Siedle reported that CalPERS provided limited documents and refused others, citing that the public interest in nondisclosure outweighed disclosure. CalPERS countered that it provided a link to over 20,000 pages and a DVD, which Siedle received late.
The report also flagged a potential conflict of interest involving investment consultant Wilshire Associates, which is owned by firms that include Apollo Global Management—a company in which CalPERS invests.
Broader Context: A Growing National Issue
Concerns about transparency in public pensions are rising nationwide. Rich Wiggins, a former officer at the Iowa Public Employees’ Retirement System, has advocated for independent oversight after alleging inaccuracies in reporting. He is currently suing Iowa for wrongful termination.
In contrast, the New York State Common Retirement Fund has had an inspector general since 2008, serving as a model for independent oversight that California currently lacks.