Calpers, the biggest public pension plan in the US, admitted a decision to put its private equity programme on hold for 10 years had cost it up to $18bn of returns as it announced an overhaul of its governance.

In a frank assessment of past failings at the $440bn retirement system, chief investment officer Nicole Musicco said the scheme serving 2mn Californians had suffered from “frequent changes” to its strategy that had “detracted” from its return profile.

“Our returns have been frankly lower than expectations,” said Musicco, who was appointed in February last year. “We constructed a portfolio to limit downside and missed out on a big chunk of growth . . . a 10-year era of growth.”

Musicco said the scheme’s returns had suffered from several missteps in 10-12 investment areas but zeroed in on the fact it had not deployed enough capital to private markets at a time when they were booming.

“Taking a sharper look at the scheme’s private equity programme, the period between 2009 and 2018 was a period of time when we really stopped committing . . . the programme was put on hold,” she said.

“The impact of us not deploying capital during that period of time is estimated anywhere to $11bn to $18bn.”

Musicco was addressing the fund’s investment committee following a “deep dive” into the system’s performance over the past decade that was launched soon after her appointment. Calpers announced a 6.1 per cent loss in the year to June 30, a performance that lagged behind its peers.

Calpers also needed to “reflect” on its decision to favour global markets from 2008, said Musicco, rather than capitalising on domestic opportunities in the US.

“Our decision to go global for growth, rather than having a home bias . . . didn’t work as hoped,” she said.

Unveiling plans to turn the scheme round, Musicco announced an overhaul of its governance and pledged “more frequent and dynamic” reviews of its asset allocation strategy.

“We really need to develop a robust governance framework to make sure we are really benefiting from agile decision-making,” she said.

“Over the past 10 years, we have seen our returns being lower than expected, we’ve underperformed peers, we’ve had inconsistent pacing with our private market programmes,” she said.

“We really need to make sure we have a culture that holds folks accountable for active risk-taking,” she added.

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