California public pension fund, the nation’s largest, faces probe launched by concerned retirees

In recent years, the management of the largest public pension fund in the country has caused an increasing alarm among a group of retirees that count.

They asked for an outdoor audit of the $ 530 billion pension fund in California, known as California Public Employees’ withdrawal system, or Calpers. They also tried to persuade legislators to install an inspector general to monitor his operations.

The two efforts have not gone nowhere. Now they have decided to take matters into their own hands.

Retired public employees take on the unusual measure of the hiring of a forensic retirement investigator to clarify the investments of the fund, the high costs he pays for large companies of Wall Street and his trained performances.

“We are going to take this alone,” said Margaret Brown, a former member of the Calpers board of directors who is now president of the retiree from the California employees association, a non -profit advocacy group with around 22,000 members.

Retirement anxiety is a national concern, of course, and it is looming at 2.3 million members of Calpers. Calpers ‘obligations to beneficiaries are only funded by 75%, according to its last financial statements, below the national average of 83.1%, according to the National Conference on Public Employees’ retirement systems.

Calpers’ investments have lagged behind other pensions – its share portfolio, bonds, real estate and capital capital returned 6.6% on average during each of the last five years, against the average gain of the public fund of 7.15%, according to NCPERS. Last year was a little better, with Calpers up 9.3% against the average performance of the public pension fund of 9.47%. However, the one -year gain of Calpers took the duration of its reference yield of 10.3%.

Although the stocks listed on the stock market has been among the most efficient assets of Calpers in recent times, the fund has increased its exposure to expensive and opaque private investments, including capital investment.

The latest most recent annual financial report shows that Calpers held 15.6% of its investment capital portfolio, against its previous target weight of 10% in 2023. Measured over one-year-old periods of investment, five years, 10 years and 20 years, according to Calpers.

Meanwhile, other major institutional investors throw investments in investment as their performance drops. In a February report on retirement funds in general, global S&P analysts have characterized increasing exposure to investment capital as a problem for pensions “because these investments often have opaque and variable disclosure and growing costs, which means that risk and yield can be difficult to measure.”

The exposure of major pension funds to major states to investment capital and limited transparency has also aroused concerns in other parts of the country, including in Ohio and Minnesota.

Brown, which was part of the Calpers’ board of directors from 2018 to 2022, spent his career at the Garden Grove Unified School District and was responsible for the planning, financing and construction of the large -scale fixed asset project.

“Our members who pay attention to what is happening at Calpers is concerned with investment decisions and 75%financing,” she said.

The fund’s decision to dive more money in investment, as other informed investors reduce their assets are a major concern, she said.

“Does anyone honestly believe that Calpers knows more than the main investors in the world?” Asked Brown. “Or does Calpers simply bet that the investment capital will save the pension fund and strengthen yields?” I think the latter. “

JJ Jelincic, another member of the Calpers Board of Directors who is now director of the retirement benefits of the Association of Public Employees, is particularly concerned with a lack of transparency in the operations of the pension fund.

“They become more and more secret, and this is clearly overwhelming,” he said. “It becomes more and more difficult to know what they are doing.”

James Sculary, a Calpers spokesman, refused to comment on the new investigation. As for the higher allowances of the retirement fund with investment capital, he said that investments have surpassed all of its other asset classes in the last 20 years, generating an annualized return of 12%.

However, this return failed to respect the reference calpers used for the asset class during the period.

As for Calpers’ financing status at 75%, Scullary said it was well prepared to provide payments to the beneficiaries of the pension “for the coming years”. Calpers, he added, “is unshakable in his commitment to serve the best interests of its members, guaranteeing their financial security and well-being now and in the future.”

Brown and Jelincic declared that they intended to collect funds to pay the Calpers analysis of the members of the Retired Employees Association and any other person interested in taking the fund to report.

They plan to hire their own judicial retirement investigator – Edward Siedle, a former lawyer for the securities committee – because their previous efforts to monitor the fund operations have failed.

These included unsuccessful attempts to bring states legislators to order an audit of the fund and demand the creation of an Inspector General to supervise it, said Brown.

Siedle’s task will not be easy. He faced the opposition to his work in other pensions and said he expected a similar response from Calpers.

Other major public pensions have inspectors who follow their activities general. In 2008, after a scandal of compensation to the game involving the common retirement fund of New York State, the New York controller, Thomas Dinapoli, created the office of the Inspector General “to prevent, detect and dissuade corruption, fraud, criminal activity, conflicts of interests and abuses within the Common Retirement Fund and in the Common Pension Fund”.

Scullary, from Calpers, said that the surveillance of operations of the fund comes from its independent auditor and its board of directors of 13 members. But Jelélinc said that when he had asked for copies of internal audits, it was informed that some were exempt from disclosure, so that the listener’s surveillance is difficult to assess. The previous reasons for refusing access to audits include allegations of lawyer-client privilege and proprietary information in investment capital documents.

At Sculary’s suggestion, NBC News raised the concerns of Brown and Jelincic with Rocco Paternoster, Executive Director of California State Retirees, a plea group of 44,000 members pleading for retired state employees on their pension and health services. Paternoster called Brown and Jeléline as former dissatisfied members of the Calpers board of directors and said that even if its members would like the level of financing to be higher than the current 75%, it is not something that panicked us. “”

Asked about the increased commitments of Calpers to expensive investment capital partnerships, Paternoster said: “We think you have to encourage people to work hard on your behalf. Commissions and costs are not a concern for us. ”

Calpers’ files show that he paid off -vestment capital managers $ 569 million in investment costs in his most recent financial year, just over half of the total of $ 1 billion that the fund paid for fees to manage its investments.

Brown and Jeléline are not the only retired people concerned about Calpers.

“I think my pension is in danger,” said David Soares, a former prosecutor of the San Francisco Bay region who retired in 2016 after 32 years of work. “What we see is a large absolute looting of the fund thanks to the costs paid to external managers. They let billions of dollars fly through the door without advantage. ”

Calpers’ executive ranks have also experienced troubles in the last decade. A former director general of the fund, Federico R. Buenrostro, was sentenced to 4.5 years in prison in 2016 for accepting $ 250,000 in bribes of a investment agent who asked for pensions to invest in investment capital funds.

Since 2020, the fund has experienced a turnover among its main investment officers, two who left unexpectedly after short mandates. One left after being revealed that he had actions in a investment capital company that does business with Calpers.

In another setback, a state judge concluded that the fund had violated the law of California Open Meetings. Scullary refused to comment on the violation, saying that the fund follows the law.

Siedle, the investigator hired by the Public Retired Group of Public Employees, has surveyed three public retirement funds in recent years. His analysis in 2024 of the pension of the Minnesota teachers’ retirement association, commanded and financed by a group of retired educators, noted that the pension had undergone the fees he paid to investment managers by failing to disclose significant payments to capital officials.

Following the survey, the fund began to list these payments – $ 80 million in 2024, or 76% of the total costs of the external manager of the fund.

Sara Swenson, spokesperson for the Minnesota pension, said in a statement that the fees, although not disclosed, had always been registered with the fund’s return calculations. The new retail practice of the costs paid to private investment managers “was made possible for work that started many years ago,” she said.