What is the CalPERS?
CalPERS is the abbreviation for the California Public Employees' Retirement System. It is the nation's largest pension fund.
How Does the CalPERS Work?
The state of California is one of the nation's largest economies. More than 1.6 million people there are employees of public institutions such as schools and local governments. Accordingly, these public employees receive a pension as part of their compensation. This pension, CalPERS, is funded by contributions from the employers and employees. To ensure that the fund has enough money to make pension payments when employees retire, it invests that money in stocks, bonds, venture capital, real estate and other assets.
In 2012, CalPERS had about $234 billion invested and another $3 billion in cash.
Why Does the CalPERS Matter?
As the largest pension fund, CalPERS invests billions. It must make these investments with its liabilities in mind; in other words, it must ensure that it always will have the money to pay out pension benefits to retirees. In 2012, approximately half of its portfolio was in equities and another 20% was in bonds and other debt securities. Accordingly, it can make some very large trades and has a lot of influence in the market. CalPERS can also be a source of capital for growing companies: It invested $34.2 billion in private equity in 2012.