California Public Employees’ Retirement System needs “strong” GPs to endure political opposition to climate and sustainability investments, according to CEO Marcie Frost.

“We are getting a little more demanding about the capital, making sure that we have more values alignment,” Frost said during a keynote interview at PEI Group’s NEXUS 2026 in Orlando on Tuesday.

“We need our GPs to be strong. We need our GPs to withstand the political pressures that they’re getting in addition to the political pressures that CalPERS continues to get,” she said.

As the largest public pension fund in the US, CalPERS has become accustomed to scrutiny from many sides, but Frost warned that its GPs may soon face similar criticism if they have not already.

“We’re a strong climate investor, and so there’s been quite a bit of criticism about the fund’s investments in climate technology or the transition itself,” she said, noting that the pension plan’s approach had been to take a “very neutral” position and educate stakeholders on its methods.

“The spotlight hasn’t been on a lot of our partners yet, but if you haven’t gotten it, it likely will come your way at some point.”

CalPERS, according to Frost, has handled the load by remaining politically neutral and “keeping a very soft posture on these things”.

Frost also flagged instances in which executives at CalPERS’ portfolio companies, or among its fund managers, have become involved in politics. “If you have an interest in being in politics, then exit the company [and] go work in politics. But those two things do not mesh well and in particular at CalPERS.”

Diverse DNA

Frost described how CalPERS’ emerging and diverse manager programme has paid dividends in recent years, bringing in a wider base of GPs who often do better than more established counterparts.

“This is the DNA of CalPERS. What we have discovered through our own investments, through our manager selection, of which we are quite diligent about, is that the book performs very, very well.”

While CalPERS’ relationships with GPs were strong, according to Frost, they were “very concentrated”, and the pension plan had to cast a wider net to bring more diverse fund managers.

“This is not a criticism of either side, but we needed to broaden the funnel at the top and bring more managers in. We can get more active risk/return when we select those correct emerging and diverse managers in addition to our traditional managers.”

CalPERS is aiming to place around 10 percent of private equity portfolio with emerging and diverse managers, according to Frost.

Peter Cashion, managing director for sustainable investments at CalPERS, told New Private Markets in November that the pension plan’s sustainable investments programme has advocated for its real assets and private debt teams to engage with more emerging and diverse fund managers, given the good results in private equity investments.

CalPERS’ investment portfolio logged a return of 7.7 percent as of December last year and surpassed the target of 6.8 percent, according to Frost.

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