Another View: Private equity investments pay off for CalPERS

Henry Jones
Henry Jones

The California Public Employees’ Retirement System’s investments in privately held companies have come under recent scrutiny. This week, economist Eileen Appelbaum and Cornell University professor Rosemary Batt made much ado about nothing by offering up false claims that CalPERS was changing its private equity strategy and benchmark to help validate its decision to invest in the asset class (“Private equity funds are a bad deal for retired state workers,” Viewpoints, Dec. 14).

Nothing could be further from the truth. No changes to the benchmarks were proposed, and none were made. The private equity policy in question was approved, and the CalPERS board voted Monday to retain language to ensure that these investments maximize risk-adjusted returns.

The important role of private equity investments is clear. Since 1990, they have earned more than $24 billion, after all fees and expenses, for our members, employers and taxpayers. An analysis using actual historic stock returns shows that if CalPERS had invested these assets in the stock market instead, it would have missed out on as much as $17 billion in gains. These are real dollars that benefit local economies and help retirees live meaningful lives after careers in public service.

Private equity’s annual return for CalPERS has averaged 14.4 percent over the past five years, 11.9 percent during the past 10 years and 12.3 percent during the past 20. This is strong performance – the best return of any asset class during those 20 years.

CalPERS has been a leader in seeking reforms in the private equity industry, advocating for additional transparency and disclosure. We helped start the Institutional Limited Partners Association to advance the interests of private equity limited partners such as CalPERS. We work with our investment peers, regulators and state and federal leaders to promote standardized reporting and greater fairness, and we recently were one of the first large public pension funds to disclose the profits we share with our private equity partners.

As with any investment, we will continually review the roles, benchmarks, risk and returns of all of our asset classes to ensure we are responsible fiduciaries. Based on our experience, private equity has an important place in the CalPERS portfolio.

Henry Jones is chairman of the CalPERS Investment Committee and vice president of the board. He can be contacted at