The $367.7B California State Teachers’ Retirement System’s (CalSTRS) private equity buyout strategy was a key contributor to the outperformance of the portfolio, according to the pension system’s consultant Meketa.
At its September board meeting, CalSTRS reported that the private equity portfolio outperformed the Custom State Street Index over the trailing one- (8.5% vs. 7.0%), three- (5.2% vs. 4.2%), five- (16.6% vs. 15.4%), and 10-year (12.6% vs. 12.0%) periods. The portfolio also surpassed its custom benchmark over the trailing one- (7.8%), five- (16.4%), and 10-year (10.1%) horizons.
The program’s net asset value rose to $56.2B from $55.2B at the end of September 2024, driven primarily by a $1.8B increase in value (net of cash flows), as distributions outpaced contributions.
While the performance dipped slightly over the past six months, with the trailing one-year return declining by roughly 1.7%, Meketa emphasized that, as of March 31, 2025, long-term results remained strong on both an absolute and relative basis.
“Your portfolio is outperforming the private equity market, and that’s really a testament to an appropriate portfolio construction across underlying sub-strategies,” said Ryan Marie Decker, senior vice-president and private markets consultant at Meketa, during the meeting. “It’s a testament to your staff’s skill in selecting the best managers, and it’s also a testament to some of the performance that’s coming in from the co-investment activity.”
Year-to-date through to August 8, 2025, CalSTRS’ private equity program had experienced a net positive
cash flow of $565M, according to meeting materials presented by Meketa.
The portfolio now represents 16.1% of total fund assets, above its 14% long-term allocation target. While commitment pacing had been adjusted in recent years to reflect market conditions, Meketa cautioned that disciplined activity will still be required to maintain the long-term target.
Co-investments have become a larger part of the program, now representing more than 24% of the portfolio. The portfolio also remains well diversified by strategy and geography, noted the consultant.
John A. Haggerty, managing principal and director of private market investments at Meketa, also spoke during the meeting, saying the overallocation has contributed to a general slowdown in fundraising for individual funds, though activity has picked up recently.
“We’ve seen a slowdown in distributions, and we’ve seen an extension of the hold periods for private equity funds. It’s something that we’re watching,” Haggerty said. He added that continuation vehicles are drawing market interest as a way to provide liquidity before the natural sale process of private equity investments.
Haggerty noted that CalSTRS staff have frequently opted to take liquidity rather than extend exposure through continuation vehicles, given the portfolio is already 200 basis points over target. That approach mirrors industry sentiment, he said, citing a recent Financial Times survey that found roughly 90% of limited partners have chosen liquidity in recent years rather than rolling capital into continuation funds.
Looking ahead, Meketa expressed optimism about buyout markets, pointing to signs of improving transaction activity in 2025 after a slow start to the year. Recent months have seen recovering U.S. equities, easing tariff concerns, and strong IPO debuts, noted the materials. Venture capital; however, may continue to struggle with fundraising amid concerns over a potential artificial intelligence bubble.
Even with modest declines, returns remain robust, said Haggerty. “They’re above your assumed rate of return, comfortably at about 8.5% for the trailing year. For the industry itself, the returns through March were 7.6%.”
