The CalPERS Board of Administration voted to adopt a new investment model, known as the “total portfolio approach,” which will increase transparency and give staff more flexibility to capitalize on a variety of market opportunities across asset classes.

Starting July 1, 2026, the total portfolio approach (TPA), will replace the strategic asset allocation (SAA) model CalPERS has used to guide investment decision-making.

Under SAA, the CalPERS Board periodically allocated a set amount to each asset class.

Under TPA, the focus will be on which investments can best contribute to the performance of the entire CalPERS portfolio, as opposed to achieving individual asset allocation targets.

“The CalPERS Board made history by adopting the total portfolio approach after learning about its potential to deliver better returns for our members,” said David Miller, chair of the CalPERS Investment Committee. “We are the first pension fund in the United States to do this, and I believe it will give CalPERS staff the edge they need to make sound investment decisions.”

“As always, our goal is to improve our funded status and reduce employer and taxpayer contributions,” Miller added.

The vote was taken as part of CalPERS’ Asset Liability Management (ALM) cycle, a strategic planning process that occurs every four years and aims to balance the expected cost of future pension payments with anticipated investment returns.

With SAA, the board sets asset allocation targets every four years. A mid-cycle check-in is also conducted to determine if the targets need to change.

Without specific asset targets in place, CalPERS investment staff members have the discretion under TPA to rapidly adjust their investment decisions and strategies to successfully adapt to a market in flux.

A March 2025 survey of 26 large funds employing TPA saw their investments outperform those using the SAA model by 1.3% per year over a 10-year period.

“This is an evolution in our investment decision-making approach at CalPERS, and I commend the board for taking such a bold step,” said CalPERS Chief Executive Officer Marcie Frost. “TPA encourages greater collaboration among the investment team, so that their collective wisdom is harnessed to judge investments based on their potential to benefit the entire portfolio.”

The board also adopted a single benchmark, or reference portfolio, set at 75% equities and 25% bonds, which will be used to judge the performance of the portfolio CalPERS staff construct under the TPA model. Using such a single, primary point of reference, rather than the 11 benchmarks currently used for each asset class, will improve transparency and make it simpler to judge performance.

After the vote, the fund’s discount rate, which is comparable to an assumed rate of return and is used to help calculate employer contributions, remains unchanged at 6.8%.

Source: CalPERS