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Calpers Strategy

Calpers, the largest public pension plan in the US, is shifting its investment strategy by reducing stock and bond holdings and increasing private market investments by over $30 billion. Scott Galloway questions whether Calpers is chasing returns or recognizing a structural advantage in private equity, noting that asset classes often struggle to maintain long-term advantages 1. Ed Elson highlights that Calpers' future projections of lower returns indicate a realistic approach, acknowledging the past decade's exceptional performance in private equity 2.

The question here, and I don't feel like I have an answer, is this, is Calpers chasing returns, which is not a good idea, or do they see a structural advantage around private equity and they want to get in front of it?

--- Scott Galloway

This strategic shift reflects a broader trend of wealth concentration and market dynamics, with private equity emerging as a dominant force.

   

Private Equity

The rise of private equity is reshaping investment landscapes, with assets under management skyrocketing from $4 trillion to $15 trillion in a decade. Scott Galloway notes that private equity firms benefit from long-term capital commitments and low interest rates, allowing them to take control positions and apply financial engineering to enhance company value 3. Ed Elson suggests that not being exposed to private equity could be seen as irresponsible for pension funds, given its significant growth and impact 4.

The returns are mediocre to crappy. I mean, we've pointed this out, the s and P returned 29% last year, but if you removed those seven companies, it would only be up 8%.

--- Ed Elson

This surge in private equity highlights its growing importance and the need for strategic exposure in investment portfolios.